Overtrading storm looms over construction industry as insolvencies continue to rise
Commenting on the latest construction insolvency statistics Kelly Boorman, national head of construction at RSM UK, said: “In the 12 months to February 2024, construction experienced the highest number of insolvencies above any other industry. Given the acute pressures the industry is facing, we can expect this number to continue rising. Pipelines are full with many businesses having secured works for 12 months ahead, however the supply chain has been struggling with continual changes to project mobilisation dates being pushed back and pulled forward. This is adding additional pressure to the supply chain and its workforce. The uncertainty of start dates and volume of work is making for an unstable environment, and it is difficult for businesses to predict their working capital needs.
“The unpredictability of working capital needs to deliver the project pipeline, coupled with businesses reporting losses on legacy contracts continues to create challenge to access affordable debt and appetite from funders. The industry urgently needs a review of how businesses are funded and the cost of those debt facilities. Businesses in the supply chain are stuck between a rock and a hard place as there’s a pipeline of activity, but without access to capital, are unable to deliver on projects.”
She added: “With a predicted surge in housing activity and large infrastructure project awards anticipated, there is an overtrading risk looming. This could lead to multiple acquisitions and redeployment of labour in the supply chain, especially as the housebuilding market picks up. As a result, subcontractors will be carefully considering their involvement in major infrastructure projects, adding to an already unstable marketplace.”
