Quarterly survey produced by Euler Hermes UK and NTC Economics show construction sector profits decline for fifth consecutive quarter and cash flow unchanged from a year ago

Euler Hermes UK Cash Flow and Profit Report Q4 2006. A quarterly survey produced by Euler Hermes UK and NTC Economics. Latest construction industry findings: Construction sector profits decline for fifth consecutive quarter - Cash flow unchanged from a year ago.

The Q4 Cash Flow and Profit Report (2006) from Euler Hermes UK, a company of Euler Hermes, subsidiary of AGF and member of Allianz, confirmed 2006 as a poor year for the financial performance of UK construction firms.

Companies surveyed have reported a decline in profits in each of the four quarters of the year, while cash flow has struggled to improve over this period and the incidence of payment delays from customers has risen.

The latest sharp decline in construction sector profits in Q4 was blamed on margins being squeezed by the combination of sharply rising raw material and labour costs and the discounting of charges in the face of strong competition.

Only the strength of the domestic economy was reported to have exerted a positive influence on profits through the quarter.

While profits continued to slide, construction firms reported a negligible improvement of just 0.4% in their cash flow in Q4 from a year earlier.

This was once again well down on the year-on-year rate of growth of cash flow recorded across the wider UK economy, which posted 7.6% in Q4.

Looking ahead to 2007, construction firms expected to see growth of cash flow of just 1.3% over the coming twelve months, well down on the economy-wide average of 6.0%.

Reduced turnover, increased investment and rising raw material prices were all reported by those construction firms expecting to see weakness in their cash positions over the coming year.