Almost 100,000 small construction businesses are in financial difficulty, a recovery specialist has warned.

Analysis of Begbies Traynor's Red Flag Alert data service, carried out by its Real Business Rescue operation, found that 96,067 small and medium-sized enterprises (SMEs) in the building sector were in 'significant financial distress' in the first quarter of this year, Construction News reports.

This means those firms either had county court judgements of less than £5,000 filed against them or had been identified as having a sustained or marked deterioration in key financial indicators, such as working capital, retained profit and net worth.

The number of construction SMEs in this kind of trouble rose by 21 per cent from the previous quarter, when almost 80,000 firms were identified as facing difficulties. More than 250,000 jobs are at risk, according to Real Business Rescue.

Rob Driscoll, director of legal and business at the Electrical Contractors' Association, said the data was "hugely concerning" at an "extremely difficult time" for many small businesses in the sector.

Construction businesses are dealing with a number of difficulties this summer, Driscoll added, from tapering pandemic support schemes to the new IR35 rules on classifying self-employment. Materials shortages and changes in how VAT is paid through the supply chain are also impacting many.

He said urged all parts of the supply chain to work together, as losing companies could "jeopardise project delivery and the future capacity of the industry to deliver on all projects, particularly the public sector pipeline that is critical to our sector's recovery."

Shaun Barton, national online business operations director of Real Business Rescue, said COVID-19 would continue to impact on businesses throughout this year. He said: "The sector needs to stand firm in the hope that the unlocking roadmap begins to have a positive impact."