SME construction suffers biggest hit as geopolitics ramps up pressure on operational resilience
Friday’s company insolvency statistics indicate that small to medium sized (SME) construction companies in the construction supply chain are seeing the biggest impact from geopolitical tensions in the Middle East. The data released today showed that in the three months to May there were 592 insolvencies of these smaller construction entities, the highest quarterly number since May 2025 (594). These businesses, which are broadly defined as conducting “specialised construction activities” now make up 60% of all construction insolvencies.
The construction industry experienced the highest number of insolvencies of any industry in the 12 months to May 2026 at 3,803, making up 17% of all insolvencies across the economy.
Commenting on the latest construction industry statistics,James Hawksworth, Restructuring Advisory partner at RSM UK said: “Today’s figures show yet again the vulnerability of the construction sector to global geopolitical events. More critically though, it is the smaller more specialised companies with the least financial resilience that appear to be suffering the most. The uptick in insolvencies over the past 3 months in this specific area of the market makes it increasingly clear that those entities lower in the supply chain will feel the most pain. If this trend continues, it could ultimately lead to fewer suppliers and increased costs for the larger contractors in the sector.
“The latest insolvency data for the sector follows the trend set in the first quarter of 2026 for numbers of winding up petitions filed by trade creditors in the sector. The number of filings in Q1 2026 represented the highest number of winding up petitions issued by trade creditors since the financial crisis – a further indicator of the major underlying pressures and structural challenges in the sector.
“The increasing cost of energy and materials are feeding through to the supply chain, squeezing margins that are already stretched, while at the same time economic uncertainty and legislative changes knock investor appetite.
“The greater pressure placed on smaller companies is inevitable. Smaller or more specialist firms do not have the leverage to resist worsening credit terms with the larger contractors, nor have the agility to cope with significant price increases or project delays.
“Whilst tensions in the Middle East appear to have lessened as a result of the Iran-US accord this week, the medium-term consequences of the past three months will continue to have a negative impact until a greater degree of certainty is reached. In the meantime, businesses will continue to contend with heightened cost pressures, reduced investor appetite and uncertain economic conditions, with no clear indication of when current headwinds will ease.”