The insolvency service recently released their official Q2 stats covering business insolvencies that took place in April, May or June.
Once again, the construction industry was the sector that saw the highest number of companies go out of business in that time with several more in financial distress themselves.
Top industrial sector by insolvency – June 2022 to June 2023
|No. of insolvencies
|Wholesale and Retail trade
|Accommodation & Food service activities
|Administrative and support service activities
And if we look in depth at the construction industry over the past five years, we can see which areas have suffered the most disruption during the pandemic, lockdowns, and the ongoing economic downturn.
The insolvency service further categorises the construction industry into three distinct segments.
- Construction of buildings – which includes both the development and building of structures
- Civil engineering – which is businesses primarily engaged in the construction of infrastructure such as roads, railways and utilities
- Specialised construction activities – which involves specific trades such as site preparation and demolition; plumbing, electrical and snagging activities – the completion of projects.
Construction industry insolvency statistics 2019 to 2023*
|Construction of buildings
|Development of building projects
|Construction of residential and non-residential buildings
|Construction of roads and railways
|Construction of utility projects
|Construction of other civil engineering projects
|Specialised construction activities
|Demolition and site preparation
|Electrical, plumbing and other construction installation activities
|Building completion and finishing
|Other specialised construction activities
Figures supplied by The Insolvency Service. *up to and including the end of July 2023
Construction activities bore the brunt of the majority of insolvencies but both development and actual construction saw a similar number.
Specialised activities saw the highest number with electrical, plumbing and other installation activities providing the majority of these closures. Civil engineering saw the least but this was to be expected as these large scale projects usually have less but larger firms involved in their completion.
Major disruptions that are impacting the Construction Industry
So what are the main factors that have contributed to the high number of insolvencies in the construction industry over the past five years?
- Supply chain disruptions
The pandemic, Ukraine invasion and soaring energy prices and costs have all caused utter havoc with even the strongest supply chains. In an industry as dependent on logistics as construction, this proved fatal for several.
While there has been some rebuilding and strengthening of these vital supply chains, they still underline how vulnerable even large businesses can be to supply shocks.
- Rising material costs
With UK inflation reaching double figures and still being the highest in Europe, the costs have hit the construction industry like a sledgehammer. Essentials such as bricks, blocks and ready-mixed concrete also increased by an average of 1.5% annually according to the latest Building Materials and Components Statistics bulletin.
- Labour shortages
The UK construction industry is experiencing a shortage of skilled workers due several factors but Brexit is clearly having a negative impact with several experienced and qualified workers deciding to go somewhere easier to make a living in the building business.
The remaining ageing workforce is not being replaced at the same rate with a shortfall of 225,000 positions expected by 2027. This is driving up wages and labour costs for remaining qualified and trained workers who understand their value now with a rise in the construction industry forecast for 8.3% over 2023 which could be higher than the baseline inflation figure by December.
If you’re in the construction sector and are worried about the immediate future of your business – there is some help available.
We offer a free initial consultation at a time of your choosing with one of our team of advisors. They can give you a better understanding of the options available to you to best meet the unique financial challenges your company faces.
Construction relies on solid and feasible plans for projects to proceed and restructuring and rescuing a business is no different.
Find out what you can do to build your construction business back stronger than before by letting us be your co-architects in recovery.