Published by Construction Enquirer
A DOZEN CONSTRUCTION FIRMS GOING BUST EVERY DAY
Construction is now suffering the highest number of insolvencies of any industry accounting for one in six of all business failures in the UK.
According to accountant Mazars, 4,370 construction firms went bust in the year to the end of November 2023, equating to an average of nearly a dozen a day.
Construction insolvencies have now consistently outnumbered any other sector for the past three years, with 2022/23’s construction failures up 7% on 2021/22 and 76% more than 2020/21.
Insolvencies in the sector have been highest in specialised construction activities, such as demolition, electrical and plumbing, representing 58% of all industry firms going out of business over the last twelve months.
Mark Boughey, partner in the Restructuring Services team at Mazars, said: “There are now on average a dozen building companies going under every single day in the UK. This is an immensely difficult period for the construction sector.”
“One problem is that the commercial viability of a lot of today’s projects were assessed three or four years ago, with fixed price contracts often being negotiated – since then, costs have spiralled, while buyers’ appetite has taken a dive.”
“We saw a number of bigger contractors filing for insolvency 12 to 18 months ago and now those failures are being felt downstream in the supply chain,” said Boughley.
“Subcontractors aren’t getting paid on time or to the agreed levels and, as a result, are now starting to experience their own financial problems. The impact of failures in the sector cuts both ways though – when smaller companies fold, it can cause major delays for the main developers in completing projects.”
“While some of the headwinds around increasing borrowing costs and material prices have eased, we’re unfortunately likely to see these difficulties persist through 2024 and into 2025.”