Development of building projects are most likely to result in insolvency

A new study from AptPay has revealed the most common types of companies going bust.

The study analysed data from Companies House based on each business’s primary nature of business, using the Standard Industrial Classification (SIC) code they registered under. The research revealed that businesses dealing with the development of building projects (41100) are the most common companies to collapse, with 183 in administration or insolvency proceedings.

Similarly, companies involved with the buying and selling of real estate (68100) are also struggling to stay afloat, with 147 companies in the administration or insolvency process.

Other holding companies (64209) are the third most common type of company to go into administration or insolvency proceedings, with 80 other holding companies listed on Companies House with this status.

In the fourth spot are companies that let and operate their own or leased real estate (68209) and road freight firms, with 75 companies each. Rounding off the top 5 are companies dealing with the construction of commercial buildings (41201) at 70 companies, further highlighting the financial strain that the property industry faces compared to other companies in other sectors.

In response to the findings, Qarrar Somji, Director and Insolvency Lawyer at Witan Solicitors said “Property development relies heavily on loans and financing to acquire land, construct buildings, and hold onto properties until they sell. This creates a significant debt burden. Similarly, the real estate market is closely tied to the overall economy. When people are struggling, they are less likely to buy houses or commercial properties. This can lead to a surplus of unsold properties, forcing sellers to lower prices or hold onto vacant buildings with ongoing debt.”

“In the past year, we have seen a rise in the number of companies facing insolvency due to the increased cost of borrowing and the slowing economy in the UK. It can be challenging for indebted businesses to paper over the cracks and find a way out.”