Construction sector insolvencies hit 12 month high

20th November 2024

Latest data from the Insolvency Service showed that the construction industry experienced the highest number of insolvencies in the 12 months to September 2024, reaching a total of 4,264. 

Commenting on the data, Kelly Boorman, National Head of Construction at RSM UK, said “Challenges remain for the construction industry following the collapse of several major firms in recent months, with businesses of all sizes anticipating further distress due to the number of sites impacted, without the workforce available to deliver projects. Construction continues to experience the highest number of insolvencies, signalling a change in behaviour from main contractors to protect the supply chain and preserve margins.

“Main contractors are looking to mitigate the risk of insolvency cascading throughout the supply chain by supporting  earlier payment terms to prevent further cash flow issues hitting smaller subcontractors and suppliers. We’re therefore seeing enhanced due diligence being performed on the supply chain to understand financial viability and the sub-contractor ability to deliver the contract. In addition, it will be interesting to see how industry responds to last month’s Autumn Budget and allocated funding to stimulate construction activity.” 

“Although more funding provides reason for cautious optimism, there’s still some uncertainty and concern there will be an insolvency domino effect. The rise in National Insurance and uplift to national minimum wage announced will impact the supply chain, namely SMEs, due to increasing material and labour costs. This will potentially lead to further insolvencies or acquisitions by larger firms. SMEs are essential for construction due to their agility, innovation and knowledge of local markets, so it’s important government continues to support businesses of this size by addressing labour shortages and accelerating planning reform”