Construction insolvencies: A warning for business owners

Despite an 8% drop in construction insolvencies in 2024, the sector remains the hardest hit industry, with 4,032 companies going out of business. This continues a decade-long trend of financial distress, with over 11,000 construction firms lost since 2021 and an estimated 100,000 jobs disappearing.

For accountants, finance professionals, and business owners, these figures highlight the urgent need to act early when financial difficulties arise. Delaying action can turn cash flow issues into full-blown insolvency. Engaging a licensed insolvency firm like ourselves at AABRS as soon as possible can make all the difference.

Key challenges facing construction firms

Debt burden and supply chain distress:

• Rising costs and ongoing supply chain issues continue to squeeze main contractors (36.8%) and subcontractors (63.6%).
• Late payments and bad debts are pushing many smaller firms to the brink.

Labour shortages and workforce struggles:

• The industry faces a 250,000-worker shortfall, leading to rising wages and delays.
• An aging workforce and lack of skilled labour make business continuity harder.

Slow project mobilisation and financing issues:

• Large infrastructure projects are taking too long to start, leaving businesses with uncertain work pipelines.
• Difficulty accessing working capital means many firms struggle to cover day-to-day costs.

Market consolidation and M&A activity:

• Many struggling firms are being acquired or merged, not because they are growing, but to survive.
• Without investment in technology and workforce development, long-term business viability remains uncertain.

Top tips for construction company owners

• Monitor cash flow closely - Late payments can cause a domino effect. If you’re struggling to get paid, take action before it’s too late.
• Seek insolvency advice early - If cash flow issues, rising debts, or supplier problems are mounting, speak to a licensed insolvency practitioner (like AABRS ) before creditors act.
• Explore funding and government support - Look at all options, including invoice financing, emergency funding, and restructuring plans to keep operations stable.
• Invest in technology & workforce planning - The sector needs to modernise to fill the skills gap and remain competitive. Companies that adapt survive.
• Avoid trading while insolvent - Directors must act responsibly to avoid personal liability for company debts if insolvency becomes inevitable.

Final thought: Act now, not later

The construction sector remains under immense financial pressure. Even though insolvencies have slightly declined, the risks remain high - especially for smaller firms. Seeking advice from licensed insolvency practitioners like ourselves at AABRS at the first signs of trouble can help business owners restructure, survive, and avoid liquidation.

Source: Construction still worst-hit by insolvencies - Construction Wave