Construction sector accounted for 17% of business insolvencies in November

23rd January 2025

Latest data from the Insolvency Service has found that the construction sector experienced the highest number of insolvencies by business sector in the 12 months to November 2024 at 4,102, accounting for 17% of all industry cases.

The data showed that Wholesale and retail trade; repair of motor vehicles and motorcycles (3,618, 15% of cases with industry captured) was second in the sector round up. This was followed by Accommodation and food service activities (3,555, 15% of cases with industry captured), Administrative and support service activities (2,394, 10% of cases with industry captured), and then Manufacturing (1,917, 8% of cases with industry captured).

Kelly Boorman, National Head of Construction at RSM UK, said “Although the construction industry continued to see the highest number of insolvencies in November, we are starting to see consistency in open enquiries rather than a spike. However, this doesn’t mean the debt burden is easing yet. For companies planning ahead, access to funding will not be any easier, despite pipelines being strong, as they need to consider interest rates and cost of debt which are still a challenge.

“Stronger pipelines and ongoing funding issues could therefore place construction businesses in an overtrading trap, as it remains difficult to raise the working capital required to deliver projects. There are also ongoing labour shortages, exacerbated by increased volumes and increases to employers’ National Insurance contributions, driving up labour costs and adding further tension in the supply chain which may increase risk of collapse.

“Construction businesses are also still faced with the tail leg of legacy contracts which are costly to get over the line, taking up cashflows which weren’t forecasted to be used. While it appears things are stabilising, these cost pressures plus lack of visibility across the supply chain will cause challenges for main contractors, so we expect to see consolidation throughout the supply chain moving into 2025.”

Saxon Moseley, Partner and Head of Leisure and Hospitality at RSM UK, said “As the first month of insolvency data since Rachel Reeves’s Budget in October, the month-on-month rise in insolvencies in November could be an early warning sign of what’s to come for the hospitality industry. The tax rises set to hit operators from April are likely to be the final straw for some. 

“The lowering of the threshold for employers’ National Insurance contributions (NIC) is particularly damaging for the sector, given its reliance on part-time and casual workers. The unintended consequence could be that employers focus on utilising their existing workforce and full-time workers instead, putting younger individuals or those with caring responsibilities at a disadvantage.

“Despite households sitting on record savings, the consumer-led recovery that many operators are hoping for hasn’t come to fruition yet. Those that are able to ride out the storm and navigate the hurdle of NIC changes in April will be well positioned to take advantage of the expected uptick in consumer confidence later on in the year. There will also be consolidation opportunities for well capitalised operators as they look to grow and bring efficiencies through strategic acquisitions.”