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Latest construction firm insolvency figures

Published: 18/03/2024

Construction firms accounted for 16.6% of all insolvencies in England and Wales in January 2024, according to the Insolvency Service, with 295 registered construction businesses becoming insolvent.

In the year to January 2024, the total number of construction firms becoming insolvent was 4,383. This was an increase of 5.9% on the 4,139 insolvencies recorded in the year to January 2023, and a 36.2% increase on the 3,218 in 2019.

Source: The Insolvency Service

In Scotland, there were 19 construction company insolvencies in February 2024, accounting for 20.2% of all insolvencies. This was four more than in January 2024, and two more than in February 2023.

The total for the 12-month period up to February 2024 was 203, which was a 0.5% decrease on the 202 insolvencies in the year to February 2023, and a 1.9% decrease on the 207 in 2019.

Source: The Insolvency Service

By rough comparison, in 2023, construction firms accounted for 13.8% of all registered businesses in the UK, suggesting the industry is still disproportionately affected by insolvency.

Within the construction industry, firms categorised as providing specialised construction activities are consistently the most affected across Great Britain. This 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 on profit warnings issued by listed construction companies has shown particular vulnerabilities in the industry. In its 4Q2023 report, it revealedĀ Household Goods and Home Construction was the FTSE sector with the second highest percentage of profit warnings (45% of companies).

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.

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 the BCIS Price Adjustment Formulae Indices (PAFI).

The data in these indices, 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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Price Adjustment Formulae Indices online (PAFI)

The price adjustment formulae is 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.

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