The construction industry faced the highest rate of insolvencies in the year to April 2024, with 4,401 companies in England and Wales declaring insolvency. Tight funding, high labour costs, and political uncertainty contributed to the rise, with further increases expected in Q3 2024.
The construction industry experienced the highest rate of insolvencies in the year leading up to April 2024, according to data from the Insolvency Service.
A total of 4,401 construction companies in England and Wales declared insolvency during this period, accounting for 18 percent of all business insolvencies. This number is nearly 500 more than the wholesale and retail sector, which had 3,906 insolvencies. The accommodation and food service sector followed closely, with 3,821 insolvencies.
In April 2024 alone, 399 construction businesses registered for insolvency, a significant increase from 315 in March.
Kelly Boorman, RSM UK’s national head of construction, noted that construction businesses are struggling with tight funding conditions. Interest rates have not decreased as quickly as needed, and rising labour costs are squeezing profit margins. Boorman highlighted that while project pipelines are growing, the lack of access to working capital and the time required to mobilize are major factors contributing to the high number of insolvencies.
Boorman also pointed to political uncertainty, extended payment times within the supply chain, and expected labour shortages in the summer months as additional challenges. RSM UK anticipates a further increase in construction insolvencies in the third quarter of 2024.
Boorman emphasized the need for the next government to prioritize de-risking the supply chain, reducing payment terms, and providing clear infrastructure planning and spending. These measures would help businesses make more informed and long-term growth decisions when bidding for projects.
Notable companies that became insolvent in the year to April 2024 include Buckingham Group, Henry Construction, and Readie.
Jo Streeten, managing director for building and places at Aecom, also predicted a challenging second half of the year. She mentioned that fluctuating output and a slowing economy in April could delay the rate cuts needed to ease pressure on balance sheets. Streeten added that the upcoming election might bring improved conditions through a new infrastructure strategy and a more effective planning system. However, contractors will need to continue managing costs effectively until increased demand, potentially driven by greater political certainty, materializes.