The construction sector has seen almost 4,000 insolvencies over the past year – the highest total of all industries.
The latest Insolvency Service figures reveal 3,984 construction firms went under in the 12 months to the end of June, which accounted for 17 per cent of all business failures.
This was higher than the second-placed trade, wholesale and retail (3,655), and hospitality in third (3,366).
In July, the overall number of registered company insolvencies in England and Wales was 2,081, similar to June this year (2,053) and July last year (2,078).
Monthly company insolvency numbers in the first seven months of 2025 were higher than the second half of 2024, but remained slightly lower than the 30-year annual high seen in 2023, the Insolvency Service said.
Kelly Boorman, national head of construction at accountancy and consultancy firm RSM UK, said the figures are high despite the government’s focus on housebuilding and infrastructure.
“While it is positive to see interest rates coming down, which will ease the cost of debt burden for many SME businesses and provide access to funding, enabling delivery of the enlarged pipelines, this also causes concern over the risk of overtrading,” she said.
“As construction activity ramps up, the risk of strain on the supply chain will likely grow.
“Businesses continue to grapple with rising costs, including inflationary pressures and higher national insurance contributions, without the flexibility to pass these costs on. As a result, the supply chain may tighten further, leaving businesses on the back foot.”
Boorman warned that main contractors would “inevitably face greater costs as the pricing power moves back into the supply chain, with labour shortages stretching capacities”.
“Many of these businesses will also lack the organisational structure, and the risk and financial management needed to support fast-paced growth and rising demand, which could contribute to future insolvency spikes,” she said.
“We could therefore see an uptick in [merger and acquisition] activity, as businesses look to absorb parts of the construction supply chain to secure labour and materials and ensure supply continuity.
“However, this could lead to workforce migration and more instability for smaller businesses due to a squeeze on labour and rising wage pressures.”
The Insolvency Service statistics include administrations but also cover forms of insolvency such as liquidation and receivership. The figures relate to England and Wales only.
Earlier this month, Creditsafe data showed that construction sector administrations in July had fallen to their lowest monthly level since January.
The 20 business failures last month marked the lowest number since January’s 10, but the total was broadly the same as July last year, when 19 went under.
However, the latest figure is a notable improvement on July 2023, when 29 administrations were reported.
Creditsafe has logged 170 construction business administrations in the year to date, compared with 167 in the first seven months of 2024.
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Nicola Harley