Construction insolvencies continue to rise amidst growing political uncertainty
In April 2024, the number of registered company insolvencies in England and Wales was 2,177, 18% higher than in March 2024 (1,838) and 18% higher than in April 2023 (1,838). Company insolvency numbers also remained above levels seen during the Covid-19 pandemic.
The construction industry experienced the highest number of insolvencies in the 12 months to March 2024, reaching a total of 4,273.
Commenting on the latest construction insolvency statistics Kelly Boorman, national head of construction at RSM UK, said: “As expected, in the 12 months to March 2024, construction continued to experience the highest number of insolvencies above any other industry. Many construction businesses are still recovering from legacy contracts, precured as fixed cost contracts pre-Covid and subject to litigation. The industry has been seriously impacted by inflationary rates and labour costs, especially in the last year. This, coupled with an accelerating pipeline, is causing additional challenges as there isn’t the availability of working capital for businesses to carry out work, which is a key contributor to rising construction insolvencies.
“The industry is stuck between a rock and a hard place, and businesses need support creating sensible growth to prevent overtrading, while navigating ongoing issues with legacy contracts. With the risk of overtrading rising, plus squeezed supply chains and labour shortages as the market picks up, there’s further challenges on the horizon as labour costs will go up, adding more pressure on businesses and their margins. As the housing market also picks up throughout the year, this will pull on material costs and labour.”
She added: “Looking ahead in Q3 2024, we’re likely to see construction insolvencies accelerate, due to added strain in the market as businesses struggle with a lack of working capital, accumulated debt and falling cashflows brought about by legacy contracts. In addition, there’s growing uncertainty around future spend due to the political environment and looming general election, which is causing concerns around the supply chain, the government contracts that will be available, as well as the time to award and mobilise these projects.”
