Another 310 construction companies became insolvent in March, the latest official figures have revealed.
This took the rolling annual total of business failures in the sector to 4,274, the highest number of any industry measured.
Construction was responsible for around one in six insolvencies in the year to 31 March 2024, according to data released this morning by the Insolvency Service.
More than 300 firms from the sector have gone to the wall in each of the past eight months, with a peak of 421 last November.
Contractors engaged in electrics, plumbing and other installations were the worst hit, with 86 insolvencies in March.
The Insolvency Service attributed 74 failures to envelope or fit-out businesses and just 14 to civils specialists.
Kelly Boorman, national head of construction at financial consultancy RSM UK, said many contractors were struggling to make deals secured before the pandemic work in the new economic landscape.
“The industry has been seriously impacted by inflationary rates and labour costs, especially in the last year,” she added. “This, coupled with an accelerating pipeline, is causing additional challenges as there isn’t the availability of working capital for businesses to carry out work.”
Boorman called for businesses to be supported to create “sensible growth”.
“With the risk of overtrading rising, plus squeezed supply chains and labour shortages as the market picks up, there are further challenges on the horizon,” she added.
“Looking ahead to the third quarter of 2024, we’re likely to see construction insolvencies accelerate due to added strain in the market as businesses struggle with a lack of working capital, accumulated debt and falling cashflows brought about by legacy contracts.”
Jo Streeten, managing director of buildings and places at Aecom, said it was “no surprise” to see so many construction failures.
“As contractors’ most desired tonic, a cut to interest rates has the greatest potential to stoke demand – particularly in the critical area of housebuilding,” she added.
“However, recent wage growth means a cut in June is far from certain. In reality, with a general election on the horizon, significantly improved conditions are unlikely to manifest until 2025.”
Everest 2020 and Utilities Design & Planning were among 13 administrations recorded in the sector in April, separate figures released earlier this month revealed.
Meanwhile Red Flag Alert and Begbies Traynor’s joint report on financial distress in the UK economy in the first quarter of 2024 showed a 39 per cent hike in struggling construction companies from the same period a year earlier.
Julie Palmer, partner at Begbies Traynor, said: “Levels of financial distress in bellwether sectors such as real estate and construction point to a troubled UK economy.
“Right now, many companies will be pinning their hopes on a meaningful cut to interest rates later this year, but the Bank of England continues to be hawkish, so it is unlikely to make a cut in the near-term given inflation is still higher than expected.
“All of this means that these pressures are here to stay, and I fear this will result in thousands of businesses failing in the coming months as the constant pressures will become too great for many.”
