Construction is one of the UK’s most important industries, building everything from homes to roads and vital infrastructure. But in recent years, the sector has faced growing financial problems. A record number of companies have gone out of business, highlighting the need to understand why this is happening and what firms can do to protect themselves.
At Campbell Crossly & Davis, we support construction companies facing financial pressure. Whether it’s managing debt, dealing with late payments, or planning for the future, we help businesses take control before it’s too late. Let’s explore construction insolvencies and see how we can help your business.
The Current Picture: How Bad Is It?
Construction companies now account for more insolvencies than any other sector in England and Wales. In the year leading to March 2025, more than 4,000 construction firms became insolvent. That’s around 18% of all company failures in the UK, according to The Insolvency Service.
While the total has dropped slightly from 2024, it’s still much higher than before the pandemic. The construction industry is clearly in a difficult place. Many firms that have entered liquidation are smaller subcontractors or specialists who often feel the financial pressure first.
In Scotland, construction accounted for nearly 16% of all insolvencies in April 2025. Although Northern Ireland doesn’t break down sector data, the trend is likely similar. Worryingly, insolvency in construction is not just limited to one region or type of business: it’s affecting the entire supply chain.
What’s Causing Construction Insolvencies?
Many different problems have come together to create a tough climate for builders and contractors. Here are the most common causes:
High Debt and Expensive Finance
Interest rates have risen sharply in recent years, making borrowing more expensive. Construction companies, especially smaller firms, often rely heavily on loans and credit to cover costs before they’re paid by clients. Now, those loans cost more to repay, and many firms can’t afford the higher charges.
Even if a company has a full schedule of work, that doesn’t mean they’re in the clear. Without strong working capital, it’s hard to get jobs started or keep them going when payment terms are delayed.
Rising Costs and Squeezed Profit Margins
Prices for materials like steel, timber, and cement have gone up significantly. Wages are also rising due to a shortage of skilled workers. Many businesses have seen their profit margins disappear as they try to keep up with these growing expenses.
Contracts signed months ago at fixed prices may now cost much more to complete. Without clauses that allow for price changes, companies are stuck with the original terms. As a result, many are losing money on jobs they were once counting on for profit.
Late Payments and Cash Flow Problems
Construction work is often paid for in stages, which means companies must cover costs long before they receive any money. If clients delay payments, or worse, don’t pay at all, this creates serious cash flow issues.
When cash flow stops, the whole business can grind to a halt. Suppliers go unpaid, staff may not get wages, and subcontractors lose trust. These problems can quickly snowball into insolvency or even full construction firm liquidation.
Project Delays and Uncertainty
Even when firms have projects lined up, delays are now common. Changes in government policy, slow approvals, and planning problems all push back project timelines. This creates uncertainty and makes it hard for firms to plan or forecast their income.
Some large businesses, including those in the project group construction sector, have even entered liquidation after too many delayed or cancelled jobs left them unable to pay their bills.
Strain on the Supply Chain
Specialist contractors are especially vulnerable. They depend on payments from bigger firms, and when those payments are delayed, they suffer first. Insolvency in construction can be like a chain reaction; when one link breaks, the whole system feels the impact.
Losing key suppliers also makes it harder to complete projects on time and to the right quality. This damages relationships and can lead to penalties, further damaging a company’s financial position.
Real-World Impact of Insolvency in Construction
These financial problems have real consequences. Projects are being cancelled or delayed, which affects not just construction firms but also local economies and housing supply.
Job losses are also mounting. Every time a company goes under, it puts tradespeople, engineers, and office staff out of work. Many of these roles require specialist skills that are hard to replace.
The failure of one company can also affect others. Subcontractors and suppliers rely heavily on regular payments. When those payments stop, they may also face insolvency or be forced to cut staff and services.
Signs Your Business May Be at Risk
At Campbell Crossly & Davis, we believe spotting the warning signs early can help avoid disaster. Here are a few indicators to watch for:
- Regular delays in receiving payments
- Requests for early release of funds from clients or changes to payment terms
- Rising costs on jobs with fixed-price contracts
- Reduced workforce or fewer deliveries on-site
- More aggressive behaviour from partners or suppliers
- Late filing of accounts or pressure from lenders
These may seem small on their own, but together, they could be signs of deeper trouble. If you spot them, it’s vital to act quickly.
What You Can Do to Protect Your Business
In tough conditions, the businesses that survive are usually the ones that plan ahead. Taking action early gives you more options and can protect your team, your projects, and your reputation.
Improve Cash Flow Management
Track your income and outgoings carefully. Make sure you understand your working capital needs for every project. Don’t rely too heavily on credit, and try to build a buffer for unexpected costs.
If clients are regularly late, consider tightening your payment terms or including penalties for delays.
Review Your Contracts
Where possible, include fluctuation clauses that allow for changes in material or labour costs. These can help protect your profit margins on longer jobs.
Using tools like the BCIS CapX formulae, you can link your pricing to real-world inflation figures, giving you more flexibility and fairness in your agreements.
Diversify Your Work and Clients
Firms that only operate in one sector or rely on one or two clients are at greater risk. Consider taking on a mix of public and private jobs or expanding into related areas to spread the risk.
Embrace Efficient Working
Technology can help improve how you manage jobs, track costs, and plan for delays. Using digital tools for procurement and site management can save time and cut waste, both of which support your bottom line.
Get Professional Support Early
If you’re worried about your finances, speak to a professional advisor as soon as possible. At Campbell Crossly & Davis, we specialise in helping businesses avoid insolvency and manage risk. From restructuring advice to guiding you through the liquidation process, we’re here to help.
What If Insolvency Is Already Likely?
Sometimes, despite your best efforts, financial pressures become overwhelming. In these cases, taking the right steps quickly is essential.
We work with construction firms to assess their financial situation and explore all possible outcomes. Whether that means entering administration, negotiating with creditors, or managing a controlled closure, we help protect directors, save jobs, and keep options open for the future.
Even if your company is facing liquidation, we can ensure the process is smooth and fair, helping you move forward with confidence.
Looking Ahead
Despite the current challenges, there are reasons to stay positive. Interest rates have started to ease slightly, and there are signs of improvement in project approvals and investment. New housing targets and infrastructure spending could also create more work in the near future.
But for now, firms must stay cautious, plan carefully, and be ready to adapt. Those that focus on cash flow, risk management, and strong partnerships will be better placed to weather the storm.
At Campbell Crossly & Davis, we’re proud to support businesses in one of the UK’s most important industries. Whether you need immediate advice or a long-term partner to help navigate uncertainty, we’re ready to help.
If your construction business is under pressure, don’t wait for things to get worse. Contact our team today and take the first step toward a more stable future.