July 20, 2024

Construction insolvencies highlight need for planning reform from next government

In May 2024, the number of registered company insolvencies in England and Wales was 2,006, 6% lower than in April 2024 (2,144) and 21% lower than the same month in the previous year. Company insolvency numbers did however remain much higher than levels seen during the Covid-19 pandemic and between 2014 and 2019.

The construction industry experienced the highest number of insolvencies in the 12 months to April 2024, reaching a total of 4,401.

Commenting on the latest construction insolvency statistics Kelly Boorman, national head of construction at RSM UK, said: “Construction insolvencies continued the upward trajectory of previous months, with the industry maintaining the highest number of insolvencies above any other industry in the 12 months to April 2024. Funding is still tight for construction businesses, especially as interest rates haven’t come down as quickly as needed, which alongside rising labour costs, means margins are smaller than ever. With pipelines continuing to grow, there’s an increasing tension from managing lack of access to working capital to deliver projects and the time taken to mobilise, both key contributors to the number of construction insolvencies.

“The current geopolitical landscape is adding uncertainty in the market in terms of funding and infrastructure spend. Payment terms are also stretching the supply chain, due to added strain with accumulated debt and falling cashflows brought about by legacy contracts. Additionally, with access to labour expected to worsen in the summer months, we expect a ramp up in construction insolvencies in Q3 2024, as businesses will be unable to deliver on protects from a financial and labour perspective. The next government must therefore prioritise de-risking the supply chain, reducing payment terms, and provide clarity on infrastructure planning and spend, enabling businesses to make more informed and long-term growth decisions when bidding for projects.”