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鈥榃hen you ring a Gordon Ramsay restaurant on Monday and can still get a table for Wednesday you know times are tough.鈥�

This comment from a City analyst last week is a telling insight into the state of the economy as companies retrench on every front, from slashing staff numbers to forgoing Michelin-starred business lunches.

It has been a year since Northern Rock鈥檚 bail out by the government announced the arrival of the credit crunch on this side of the Atlantic, and businesses up and down the country have been feeling the pinch ever since. Construction in general, and housebuilding in particular, has suffered more than most. Since the world鈥檚 credit machinery seized up last summer, more than 6,000 people at UK housebuilders have lost their jobs.

And there does not seem to be much light at the end of the tunnel just yet. The latest figures from Pricewaterhouse Coopers show that construction insolvencies have risen 35% since Northern Rock customers began queuing around the block to withdraw their savings on 14 September last year.

For the contractors and housebuilders still standing, it is time to adapt. While it is too early to assess the economic fallout of the crunch, a year of financial freefall has seen a power shift in all sectors, and construction is no exception. For now, those holding the purse strings are the ones calling the shots, not those laying the bricks. So how have we got here and what difference, exactly, has a year made?

Greg Fitzgerald, chief executive of contractor and housebuilder Galliford Try, can pinpoint the exact moment that he realised just how bad the housing market had become. 鈥淎fter months of gradual decline, things fell off a cliff in April. When the first week鈥檚 sales figures landed on my desk I knew we had a real problem,鈥� he recalls. 鈥淚t became obvious we had to act severely and stop giving it time.鈥�

Like many of its peers, Galliford had to make cutbacks. And fast. The group made 260 of its 3,900 staff redundant as sales across the industry fell by two-thirds.

Around the same time, Persimmon announced 2,000 redundancies following a 31% fall in reservations, Taylor Wimpey cut 900 jobs, and Bovis cut 400 of its 930 staff after it revealed a 35% fall in home sales in the six months to 30 June.

But behind the headlines, there have been quieter changes, and Fitzgerald is in agreement with Andy Yallop, chief executive of 拢100m-turnover Croudace Homes, that housebuilders鈥� new mantra is 鈥渃ash is king鈥�.

Yallop uses this phrase to highlight the fact that most companies are now focused simply on survival: 鈥淵ou can鈥檛 worry about profit during the bad times so we are almost totally run for cash now,鈥� he says. 鈥淵ou have to buy materials and pay subcontractors at different times in the cycle to ensure the flow of cash, which also changes the build sequence.鈥�

Despite Croudace鈥檚 healthy balance sheet, Yallop says his senior managers are spending three times as much of their week on cash management than a year ago. As one senior banker says: 鈥淵ou can only keep the body alive if there鈥檚 blood flowing through the veins.鈥�

It鈥檚 a lesson Tony Pidgley, chief executive of Berkeley Group, believes housebuilders have been slow to learn. 鈥淭his is the third time the industry has been caught out,鈥� he says. 鈥淧eople wondered for all those years why I scaled the business back to the London market, but I鈥檓 only relaxed today because I鈥檝e got no debt and I鈥檓 earning nice interest on my 拢100m in the bank.鈥�

Over the past 12 months, the relationship between banks and housebuilders with debt has moved onto shakier ground than ever. Pointing to the publicly stated debt of 拢1.7bn at Barratt and Taylor Wimpey, Alastair Stewart, housebuilding analyst at Dresdner Kleinwort, says the ascendancy of cash flow has resulted in this power shift. He adds that the relaxation of lending deals like the one agreed by Barratt鈥檚 banks in July will buy time for housebuilders, but they come with a nasty sting in the tail.

鈥淭hese housebuilders will have humungous borrowing costs. The banks are terrified they will default and if the companies miss one line of credit the banks can pull the plug.鈥�

Barratt and Taylor Wimpey are expected to pay several million pounds more per month in interest as a result of the deals.

Stewart is not the only one who is predicting even tougher times ahead for companies unable to escape the banks鈥� clutches: 鈥淪ome housebuilders will no longer be masters of their own destiny,鈥� says another analyst. 鈥淚f they say they鈥檒l deliver x million in cash flow they鈥檇 better damn well deliver it. There won鈥檛 be any room for excuses and if it means taking a hit on prices they鈥檒l have to do it.鈥�

And the warnings are coming from both sides as a senior banking source concedes there is little room for flexibility in the new climate. He says: 鈥淵es, bankers are in the driving seat but this is merely a swing in the credit cycle 鈥� for the past five years borrowers have been in the driving seat.

Risk was dramatically underpriced and borrowers were able to force through transactions that were unsustainable.鈥�

Another by-product of the crunch is the strengthening of alliances among UK banks. The banking source explains: 鈥淚nternational banks are looking for a quick exit, but the UK banks are sharing information to ensure they present a united front to clients. The days of clients playing one bank off against another by shopping around are over.鈥�

Contractors, too, have been losing their grip on the market 鈥� to their clients. This has come about because supply has begun to outstrip demand, and those putting the projects out to tender are facing financial pressures of their own.

John Frankiewicz, chief executive of Willmott Dixon, is concerned framework deals may be thrown open to outsiders as clients get twitchy about obtaining the best price. He says: 鈥淎s more contractors come onto the market and the supply side of the equation increases, it鈥檚 going to be a very strong temptation for clients.鈥�

So, is the contracting industry in danger of returning to the days of 鈥渟crew the builder鈥�? Will the quest for the best price throw partnering out of the window? 鈥淣ot yet,鈥� he says. 鈥淚t would be a disaster if we returned to a situation we thought we鈥檇 left behind.鈥�

Paul Hodgkinson, chief executive of Simons Group, is also confident that the collaborative approach will hold steady through the downturn, but concedes that margins may be squeezed. 鈥淚t鈥檚 clearly not a profit-enhancing environment but partnering is more about having the right people inside the client organisation than about the wider economy.鈥�

Alarmingly, however, few believe the industry will learn lessons from what have been unprecedented economic circumstances. Yallop says: 鈥淲e have put new systems in place to control cash but that will inevitably be overtaken by more important things, like where鈥檚 the next piece of land coming from.鈥�

And what advice is offered by the man who did get out at the right time? 鈥淒on鈥檛 get carried away,鈥� is the answer. 鈥淚f you buy a new car for 拢2,000 what do you do if someone offers you 拢5,000 for it? You sell it and buy another one,鈥� says Pidgley. 鈥淎nd what about when someone offers you 拢10,000 for the next one, and then 拢15,000 and so on. Why didn鈥檛 anyone stop and think about where the market was going? Everyone assumed it would go on forever.鈥�