Construction insolvencies signal supply chain fragility
In September 2024, the number of registered company insolvencies in England and Wales was 1,973, 2% higher than in August 2024 (1,943) and 7% lower than the same month in the previous year. 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 August 2024, reaching a total of 4,310.
Commenting on the latest construction insolvency statistics Kelly Boorman, national head of construction at RSM UK, said: “The latest rise in construction insolvencies comes amidst a number of large administrations which will eventually cascade through the supply chain, adding to ongoing funding and procurement challenges which will impact delivery of projects.
“This week we saw government commit to remove red tape and anti-growth legislation to grow the economy, with housebuilding a key part of delivering this aim. However, with construction insolvencies rising in August, there remains concerns over whether this legislation will be introduced quick enough to ease the burden and accelerate mobilisation of projects. Government therefore needs to clarify timings and its approach to supporting genuine growth in its incoming Housing Strategy.”
She added: “There is also uncertainty as to how construction businesses will manage growth, due to fragility in the supply chains and the continued risk of overtrading. Businesses are held back by fixed pricing and planning constraints, alongside labour shortages and tight funding. In order to really accelerate housebuilding and combat insolvencies, government must support distressed businesses, protect labour, and reform financial measures including payment terms and access to funding.”
John Guest, national head of social housing at RSM UK, added: “Registered providers of social housing (RPs) continue to feel the pressure of squeezed operating margins and the recent publication of September CPI will add further pressure. As such expect to see increased focus on the management of costs. This, coupled with capacity constraints within their operating models to support new developments, makes it difficult to both invest and develop new stock, while managing existing stock.
“Although social housing is still receiving interest from investors on a long-term basis, this is yet to return to the rates seen pre-Covid. As such, partnering with the private sector is crucial part of an RPs balancing act between continue to deliver their services and invest in new developments. With construction insolvencies rising in August, this will have a ripple effect throughout social housing, with project delays and increased costs making it harder for RPs to balance the books.
“While the removal of red tape to support growth is encouraging, mandatory housing targets will require government to support the public and private sector with better access to labour and available funding.”
