Construction firms face cash flow crunch amid rising insolvencies
In August 2025, the number of registered company insolvencies in England and Wales was 2,048, 2% lower than July (2,083) and 6% higher than August 2024 (1,933).
The construction industry experienced the highest number of insolvencies in the 12 months to July 2025 at 3,973, making up 17% of all industry cases.
Commenting on the latest construction insolvency statistics, Kelly Boorman, national head of construction at RSM UK, said: “The latest insolvency figures reflect the ongoing economic pressures facing construction businesses, with the industry continuing to experience the highest number of insolvencies in the year to July, despite overall insolvencies stabilising in recent months. Interest rates and inflation remained persistently high in August at 4% and 3.8% respectively, so it is likely that businesses will continue to grapple with servicing high levels of debt costs and access to affordable funding. This will bring challenges around working capital and funding future growth.
“As market activity ramps up in line with housing targets and major infrastructure projects, labour shortages will bring further pressure for businesses as wage rates increase, particularly those already operating on tight margins. Despite the government’s investment to train up to 60,000 more construction workers, a significant proportion of the workforce is nearing retirement age and there is a limited pipeline of skilled workers. Competition for labour is therefore growing, which is driving up employment costs and compounding inflationary pressures. For businesses tied into long-term contracts or legacy debt, the squeeze on cash flow is unsustainable and could leave businesses unable to absorb these rising costs.
She added: “Regulatory changes, notably the Building Safety Act and Gateway 2 are contributing to compliance costs and project delays, particularly around cladding remediation. Seasonal factors also continue to play a role in increasing insolvency risk. Contracts procured at fixed rates many years ago continue to create legacy issues for many businesses, absorbing excessive operational and management time. Following the government’s announcement this week that Chris McDonald has been appointed as the new construction minister, it’s key he prioritises measures to mitigate labour shortages and project delays, as well as encourage private investment to fund housing and infrastructure delivery in the upcoming Autumn Budget.”