Construction administrations level off in August

The number of administrations among construction firms in August has remained steady.

The latest monthly data from Creditsafe shows that 21 firms entered into administration in August – just one more than in July.

It is a different picture to 2023 when 44 were recorded. However, it is still 4 per cent higher than the same period last year when 18 were logged.

The lowest monthly number for this year remains January’s total of 10 firms.

So far this year there have been 191 administrations compared with 184 over the same period last year.

One of the largest firms to go under was Washington-based site investigations specialist Welltherm Drilling, whose latest accounts for the year ended 31 January 2024 recorded a £1.8m turnover – down from £2.2m in 2023.

In the same period it filed a pre-tax loss of £380,340 after a pre-tax profit of £465,430 the previous year.

It employed a monthly average of 16 staff.

A report by administrators at Interpath, who were appointed on 14 August, estimated the North-East firm’s realisable assets stand at £104,240 and it owes preferential creditors £17,340 and HMRC £1.3m.

Presently, they estimate there would be a deficiency of £4.5m.

According to Welltherm Drilling’s website, it has previously carried out work creating a new waterwell for the late queen at her Royal Park Estate at Sandringham, carried out investigation works for Scottish gas networks for the option of running a new pipeline under the River Clyde, and a sea defence strengthening project at Portknockie Harbour.

Most of the companies in the latest batch were not large enough to file detailed turnover and profit figures in their accounts.

However, a report by administrators at Interpath on Washington-based M Realisations 2025 Ltd said it had an outstanding debt of £2m from lending to its parent company Cenergist, which is also in administration.

They said the company’s unaudited management accounts showed it had generated a loss before tax of £8,610 in the four-month period ending 31 May 2025.

The firm, an installer of underfloor heating systems, had nine staff and was incorporated in 1998.

The administrators said that during the year Cenergist suffered from delays to the start of several larger energy projects and, as a result, incurred material trading losses.

But it was an “unexpected adjudication decision” relating to a contractual dispute, which resulted in it being ordered to pay £1.1m within five days in July, that led to it going into insolvency.

Holding steady

“Every company failure is a tragedy for those losing their jobs and livelihoods, but the good news is that builder insolvency numbers are holding fairly steady,” Gareth Belsham, director of Bloom Building Consultancy, told Construction News.

“Things aren’t great, but crucially they’re not getting noticeably worse. This holding pattern comes despite the headline strength of the construction industry. Official data shows ours was by far the fastest growing sector of the economy in the second quarter of 2025, but this expansion came too late for the building firms pushed to the edge of insolvency by months of weak orders and compressed margins.”

He said the reduction in the Bank of England base rate could bring some relief to those paying high levels of interest on debt.

“Sentiment among contractors still remains weak, but there are some bright spots on the horizon,” he said.

“But we need to see a sustained pick-up in demand before the insolvency picture improves significantly.”

Jennifer Lockhart, partner and restructuring specialist at law firm Brabners, said the underlying figures remained “troublingly high” as we come out of the sector’s peak trading period.

“This stability should not be mistaken for recovery,” she said. “Looking ahead, the risk of further distress remains very real.”

Peter Vinden, director of advisory services at Leonard Curtis, said construction was still facing a “plethora of problems”.

“With the impact of delays caused by the Building Safety Regulator, confidence in the property sector is low and not being assisted by treasury employees constantly releasing pre-budget ideas for tax increases to gauge public and industry reaction, depressing the appetite for investment,” he said.

He fears the November budget may bring further costs and taxes for the industry.

“While failure rates are only 4 per cent higher overall than last year, I do anticipate an uptick in failure rates in the construction sector for the rest of the year and into 2026,” he added.

Sam Fenwick, insolvency and restructuring partner at Wedlake Bell, said firms will have to continue to be vigilant.

“The statistics reflect ongoing distress across a range of sectors. However, the construction industry is, of course, particularly exposed to the rising costs of materials and labour throughout supply chains: a failure of one party in the chain can have a domino effect,” he said.

“Added to that is the broader economic malaise and uncertainty fuelled by domestic and world events, which are affecting investor and consumer confidence. We expect businesses in the sector will need to remain financially prudent and vigilant for the foreseeable future.”