Two in five construction firms close within five years

New research by Witan Solicitors, has analysed data from Companies House to determine the number of construction firms incorporated between January 2021 and December 2025 and compared this to the number that have since entered administration, liquidation, or been dissolved.

The data found that in the past five years, two in five (41.6%) of newly incorporated construction companies have gone into administration, liquidation, or have now dissolved .Out of 257,087 businesses that opened during this period, 107,086 have closed.

The research also analysed business mortality rates across different areas of the construction industry. Companies involved in the construction of bridges and tunnels (70.5%) faced the highest closure rate, followed by firms specialising in roads and motorways (59.5%) and railway and underground railway construction (51.9%). Commercial building construction (46.4%) and domestic building construction (43.4%) also showed significant struggles to remain viable.

On the other end of the spectrum, construction holding companies (25.7%) were the most resilient, along with businesses engaged in renting and leasing construction equipment and civil engineering machinery (32.6%) and those working in other construction installations (35.3%). Firms involved in the construction of other civil engineering projects (36.5%) and other specialised construction activities (37.3%) also showed stronger survival rates compared to the sector average.

Qarrar Somji, Solicitor-Advocate and Director at Witan Solicitors, said “The construction industry is under sustained and growing pressure, and there are very few signs that things will ease in the short term. In the past few years, we’ve even seen the collapse of well-known contractors such as ISG. So understandably, things may feel pretty bleak for firms that have just entered the market.

“But these challenges aren’t confined to one corner of the industry. Whether you’re looking at major infrastructure projects like roads, railways, bridges and tunnels, or at commercial and residential buildings, the same underlying problems keep resurfacing. Rising costs, stretched supply chains, skills shortages and increasingly complex regulation are crippling the industry.

“Cash flow remains one of the most critical pressure points, especially for smaller firms. In many cases, contractors are waiting 90 days or more to be paid. During that time, payments can be reduced or delayed through ‘pay-less’ notices, and disputes can drag on for months. This means that firms are effectively financing projects themselves while labour, materials and overheads continue to increase.

“This payment model is fundamentally flawed. While stronger regulation is clearly needed to protect the health of the supply chain in the long term, businesses can’t afford to wait for systemic reform. In the short term, firms need to be far more assertive about contractual payment terms and much quicker to put protections in place when early warning signs of financial distress appear.

“The Autumn Budget adds another layer of strain. From April 2026, the legal minimum wage for workers aged 21 and over will rise by 4%, from £12.21 to £12.71 per hour. Over the coming months, many firms will be forced to make difficult decisions about recruitment, pay, and whether projects remain commercially viable at all. Repricing work is becoming unavoidable, but that comes with its own risks in a highly competitive market. We’re likely to see more companies pushed towards restructuring or, in some cases, outright collapse.”