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 1Q2025, they report: ‘Profit warnings in the first quarter were dominated by order cancellations and delays, rising geopolitical tensions and increased employment costs. New, extraordinary challenges now overlay these stresses.’
Rising uncertainty was identified as the primary sector challenge for construction while four out of five profit warnings issued by construction and materials companies in 1Q2025 cited delays in contract commencements and project timelines.
The report suggested delays are adding strain on working capital and exposing mid-market firms and subcontractors in particular.
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 356, or 27%, of self-employed or trader bankruptcies in the 12 months to February 2025 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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