Home Commercial Property More than 4,300 construction firms collapse amid ‘an immensely difficult period’ for the sector

More than 4,300 construction firms collapse amid ‘an immensely difficult period’ for the sector

by LLP Finance Reporter
29th Jan 24 2:12 pm

The UK construction sector has seen 4,370 firms collapse and on average around a “dozen building companies” are going bust daily.

The construction sector has been hit with an “immensely difficult period” over the past year which is experiencing the largest number of bankruptcies of any other UK industry sector.

Auditing firm Mazars said that in the year to the end of November 4,370 firms went insolvent, in 2021/22 4,086 construction firms went bust and in 2020/21 there was 2,481.

Higher material and labour costs also impacted the construction industry with a 7% of insolvencies from 2021/22 and a 76% rise in 2020/21.

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Mark Boughey, a partner at Mazars, said, “There are now on average a dozen building companies going under every single day in the UK. This is an immensely difficult period for the construction sector.

“One problem is that the commercial viability of a lot of today’s projects were assessed three or four years ago, with fixed price contracts often being negotiated – since then, costs have spiralled, while buyers’ appetite has taken a dive.

“Construction contractors operate on very tight margins at the best of times – the sector is really being squeezed at both ends right now.”

Boughey added, “We saw a number of bigger contractors filing for insolvency 12 to 18 months ago and now those failures are being felt downstream in the supply chain.

“Sub-contractors aren’t getting paid on time or to the agreed levels and, as a result, are now starting to experience their own financial problems.

“The impact of failures in the sector cuts both ways though – when smaller companies fold, it can cause major delays for the main developers in completing projects.

“Whilst some of the headwinds around increasing borrowing costs and material prices have eased, we’re unfortunately likely to see these difficulties persist through 2024 and into 2025.”

Chris Farrington, a partner at ReSolve, said, “It is unfortunate to see a business with a strong trading history, and a portfolio of superb construction projects completed over the course of many years, encounter the difficulties experienced by Kenham Building.

“It is also particularly regrettable that staff were not able to be retained through this process, a reflection of the extremely challenging conditions being experienced not only by Kenham but the wider construction and homebuilding sector.”

He added, “I think it does make it even more important for us andpeople like us to make sure we understand the expertise, the financial capacity of the supply chain that we’re working with.”

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