BCIS CapX includes price adjustment formulae, a method of calculating the increase, or decrease, in contractors’ costs over any period. The formulae and indices (over 200 of them) are widely used in various sectors in the construction industry, including civil engineering contracts and facility management.
Published: 18/03/2025
Construction firms accounted for 15.8% of all insolvencies in England and Wales in January 2025, according to the Insolvency Service(1), with 305 registered construction businesses becoming insolvent.
By rough comparison, construction firms accounted for 14%(2) of all registered businesses in the UK in 2024.
The total number of construction firms becoming insolvent in the 12 months to the end of January 2025 was 4,031. This was an 8.4% decrease on the 4,402 insolvencies recorded in the year to January 2024, and a 25.3% increase on the 3,218 in pre-pandemic 2019.
Of all cases where the industry was captured in the statistics, construction continued to experience the highest number of insolvencies in January 2025.
Source: The Insolvency Service
The Insolvency Service said while the insolvency rate has increased since the lows seen in 2020 and 2021, it remains much lower than the peak of 113.1 per 10,000 companies seen during the 2008-09 recession. This is because the number of companies on the effective register has more than doubled over this period. The rate in the year to the end of February 2025 was 52.4 per 10,000 companies.
In Scotland, there were 17 construction company insolvencies in February 2025, accounting for 16.5% of all insolvencies in the country. This was six more than in January 2025, and two fewer than in February 2024.
The total for the 12-month period to February 2025 was 196, which was seven fewer than the 203 insolvencies in the year to February 2024, and a 5.3% decrease on the 207 in pre-pandemic 2019.
Source: The Insolvency Service
Within the industry, firms classified as providing specialised construction activities are consistently the most affected across Great Britain. However, analysis shows that their numbers are proportional to their overall share within the construction sector.
This category includes companies providing a range of work, typically on a subcontract basis, from demolition and site preparation to electrical and plumbing installation, and finishing work like plastering, painting and glazing.
The Insolvency Service also publishes figures for Northern Ireland, but not with sector breakdowns.
Analysis by EY-Parthenon(3) on profit warnings issued by listed construction companies has shown particular vulnerabilities in the industry.
It revealed over half of companies in the FTSE Household Goods and Home Construction sector issued profit warnings in 2024.
Reflecting on all sectors in the final quarter of 2024, they report: ‘Key issues included inventory overhangs, contract delays, and slowing order books, making for a challenging end to the year and raising concerns for 2025.’
A multitude of factors feed into company insolvency, though analysis of profit warning data by EY suggests the construction industry is particularly exposed to financial difficulty. This is in part due to the nature of contract cycles and the challenges of cash flow management that contractors and subcontractors are subject to.
Further data(4) released by The Insolvency Service showed that 360, or 27%, of self-employed or trader bankruptcies in 2024 were in construction in England and Wales.
An effective way of mitigating the risks associated with fixed-price contracts when costs are so changeable is to use fluctuation clauses linked to work category and resource-specific inflation indices, such as those available in BCIS CapX.
Our Price Adjustment Formulae Indices (PAFI), covering more than 200 work activities across building, civil engineering, specialist engineering and highways maintenance, can also be used throughout the budgeting and procurement stages to plan cash flow more effectively.
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(1) Insolvency Service – Company insolvencies, February 2025 - here
(2) Office for National Statistics – UK business; activity, size and location: 2024 - here
(3) EY-Parthenon – Analysis of UK Profit Warnings - here
(4) The Insolvency Service – Commentary – Individual Insolvency Statistics February 2025 - here
