Construction Insolvencies – The Domino Effect

In October 2024, the number of registered company insolvencies in England and Wales was 1,747, 10% lower than in September 2024 (1,950) and 24% lower than the same month in the previous year. However, company insolvency numbers also remained much higher than levels seen during the Covid-19 pandemic and between 2014 and 2019.

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 latest construction insolvency statistics 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 subcontractor 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.”

She added: “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.”

Source: RSM