Soaring insolvencies in construction sector hit new peak due to escalating expenses
🧐 Construction sector's financial woe: Ain't no denying it - insolvencies are supercharged 📈
The construction biz is in deep doo-doo as insolvencies reach un unprecedented high, according to an analysis by City AM. Over 800 construction companies have toppled like dominoes in the initial four months of 2025, marking a staggering 5% increase from last year and almost doubling the usual pre-pandemic levels.
The Insolvency Service's latest report reveals that the construction industry still lugs the title of the hardest-hit sector for insolvencies, accounting for nearly 20% of all UK company failures in February. That's around a three percentage point boost compared to last year and the highest share in three years.
🤔 So...why the hell are construction companies losing their marbles?
Experts seem to agree on a few primary culprits, starting with the skyrocketing labor and materials costs and a shrinking pool of skilled workers in the industry. These pressures are expected to be exacerbated by high energy costs and an increase in employer taxes - a real kick in the teeth for struggling businesses.
😜#truth HurtsConstruction companies are going belly-up left and right, leaving their staff out in the cold. "Once these behemoths crack, it creates a domino effect, taking smaller subcontractors down with them," a wily insolvency advisor divulged.
Bigger guns in the construction industry also been dropping like flies, such as ISG, one of the UK's heftiest contractors, with a staggering £2 billion turnover, and its lighting subcontractor, Seventynine Lighting.
It ain't just construction companies feeling the pinch. Insolvency rates are on the rise across all sectors, with March recording a nearly 9% increase compared to last year, reaching 1,992. Yet, even with these numbers, the insolvency rates still ain't reached the apocalyptic peaks of the 2008-09 economic crisis.
🤯Wait a minute, what in the world is keeping the insolvency rates below those dark recessionary times?
Well, historical limitations on statutory demands and winding-up petitions temporarily reduced compulsory liquidations. However, as those restrictions have been lifted, insolvency rates have sprung back to life, like a phoenix rising from the ashes, revealing the true financial situation of many construction businesses.
Sources:
- Construction News
- Gov.uk - Construction Sector Deal
- ACCA - Late payments in construction
- The Guardian - Why are so many small construction firms going bust?
- CIPD - Construction industry: Overcoming the skills challenge
- The escalating labor and materials costs, paired with a diminishing workforce in the construction industry, have been identified as primary factors contributing to the insolvencies in the sector.
- This financial strain in the construction industry is not exclusive, as insolvency rates have risen across all sectors, with a nearly 9% increase in March compared to the previous year.
- Despite these rising insolvencies, the current rates have yet to reach the apocalyptic peaks of the 2008-09 economic crisis, possibly due to historical limitations on statutory demands and winding-up petitions that have recently been lifted.
