Subbies still more than half of construction insolvencies

Smaller construction firms continue to be overrepresented in the latest industry insolvency figures as construction continues to be the worst-hit industry for insolvencies.

4,310 Construction companies of various sizes went out of business in the UK in the year to August, according to recent findings by the Insolvency Service, which is 1.1 per cent higher than a year ago.

Construction continues to be the worst-hit, accounting for 17.4 per cent of cases, 13 per cent than the next highest sector: wholesale and retail trade; repair of motor vehicles and motorcycles. 

The last time construction fell below the highest number of insolvencies was the year ending Q3 2017. 

Construction firms in the UK have gone under at the highest rate in a decade, with more than 11,000 firms lost since 2021 as well as around 100,000 workers. 

Subbies still worst hit 

Of the total number, 2,514 (58 per cent) were specialist sub-contractors, whereas 1,601 (37 per cent) were main building contractors. 

Of the 329 construction firms that went out of business in the UK in August this year, 211 were smaller companies.   

Smaller firms were also overrepresented in the months preceding August:

This trend is consistent with similar results reported for the same period last year: 

Jan 2023: 166 out of 292 

Feb 2023: 192 out of 333 

Mar 2023: 263 out of 444 

Apr 2023: 165 out of 283  

May 2023: 278 out of 471 

Jun 2023: 223 out of 387 

Jul 2023: 157 out of 275 

Industry Response 

Construction Products Association (CPA) economics director, Noble Francis, said: “Taking out monthly volatility, so far this year the number of firms going out of business continued to broadly flatline but at its highest levels since the financial crisis.

“The largest impacts of downturns in house building and rm&i, rises in labour, materials and financing costs plus project delays continued to be on specialist contractors. 

“More than half of the construction firms that went out of business in the year to August were specialist sub-contractors, which are most of the industry, as major house builder and Tier 1 contractor business models are based on sub-contracting cost, activity and risk out to specialist contractors.

“Specialists are, however, smaller firms that are cash-flow reliant and more vulnerable to both sharp falls in demand and cost increases, skills shortages and project delays, as they are often on fixed-price contracts.”

ISG administration  

Last Month, administrators took control of construction giant ISG, making 2,200 staff redundant and sending shockwaves through the whole industry. 

Build UK chief executive, Suzannah Nichol, told the BBC’s Today programme many smaller businesses in its supply chain ‘may not now be paid’, potentially compromising their futures. 

Following ISG’s collapse the insolvency service said dismissed employees might be eligible for statutory redundancy pay, arrears of pay, compensatory notice pay and holiday pay.

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