‘Burden of expensive debt’ hits construction as insolvencies stay high

More than 300 firms in the construction industry became insolvent in January as firms struggled to cope amid the “burden of expensive debt”.

According to data released this morning by the Insolvency Service, 305 construction companies in England and Wales went under during the month – the second most of any industry and 15.7 per cent of all businesses that collapsed.

Only the wholesale and retail motor trade recorded more insolvencies, at 312.

The construction figures represent an increase on December, when the Insolvency Service recorded 292 failures.

The sector accounted for the highest number of insolvencies for the year to January, with 4,031 in total (17 per cent). That was 400 more than the next most affected sector – the wholesale and retail trade of motor vehicles – which recorded 3,631 insolvencies.

Kelly Boorman, national head of construction at consultancy RSM UK, said the high number of insolvencies was “to be expected given the ongoing burden of expensive debt and fragile supply chain”.

She warned that, despite the “strong pipeline of work”, the sector was not seeing its volume of work increase, due to delays in mobilisation, expensive-debt issues and economic uncertainty in the wake of the government’s Autumn Budget.

“Businesses are therefore preserving working capital and are yet to see the growth they anticipated in 2025,” she added.

Boorman also warned that the sector was braced for the looming increase to employer national insurance contributions from 6 April – announced by chancellor Rachel Reeves in the autumn – which will “squeeze margins” at firms throughout the sector.

Construction industry executives have said they expect to take a hit as a result. For example, Glencar chief executive Eddie McGillycuddy told Construction News that the increase would “sting a bit”, adding that the changes were “ill-thought-out”.

Boorman did, however, welcome the government’s announcement last week of its upcoming Planning and Infrastructure Bill, which she said would “remove red tape, streamline planning and accelerate decision-making, reducing administrative delays”.

“While this is a promising development, it will take some time to materialise and it’s important the government considers the role of technology in accelerating delivery in the run-up to the Spring Statement,” she added.

The chancellor is expected to deliver the statement on 26 March.