Construction and Construction Materials in Netherlands

The construction sector is a major area of concern in Netherlands. Insolvencies increased 28% year-on-year in the first half of this year, double that from 2006 to 2008.
Analisis Credito y Caución
Madrid - 15-set-2010

How has the Dutch construction sector performed in the last six months?

The construction sector is still a major area of concern. In the past this sector contributed 4% of GDP, and so the current situation has a serious impact on the national economy. According to Statistics Netherlands, in Q1 of 2010 residential building output decreased 44%, to its lowest level since 1995, and the number of building permits issued declined 32% year-on-year. The  growth of loans for house purchases is nearing zero, with sales of houses in the first half of 2010 yet to rebound from their low 2009 level.

Besides construction itself, there is inevitably a consequent impact on sectors such as DIY, interior furnishings and equipment, which suffered a year-on-year contraction of over 5% between January and May 2010.

What is the current trend in payment delays, payment defaults and insolvencies?

There are a high number of delayed payments and defaults, and naturally Crédito y Caución is seeking, through the Atradius Group, very latest financial information on buyers in this sector in order to accurately assess the credit insurance cover that the company can reasonably provide and the advice that can offer its clients.

To put the current trend in context, while insolvencies in the construction sector increased 28% year-on-year in the first half of this year, they are double that seen in the period from 2006 to 2008. However, in view of the magnitude of the slump in the sector, current numbers arent that disappointing. In fact, the signs are that many companies are financially strong enough to adjust to the new reality of the market.

What should companies selling to buyers in this sector pay particular attention to?

Look out for signs of dispute by the buyer, legal or otherwise, and of requests for extended terms of payment, and resolve these issues immediately, as these are often used as a ploy to conceal an inability to pay.

What is Crédito y Caucións short term outlook for the construction sector?

The outlook depends on decisions by the new government, especially in resolving the uncertainty about the future of the tax deductibility of interest paid on mortgages. If the current policy of deductibility continues, Credito y Caución expects a major improvement in the market after its two years of contraction, while if the uncertainty remains so will the low level of sales.

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