Construction businesses brace for overtrading risk moving into 2025
In 2024, the number of registered company insolvencies in England and Wales was 23,872, 5% lower than the number of insolvencies in 2023, which saw the highest annual number since 1993.
The construction industry experienced the highest number of insolvencies in the 12 months to November 2024 at 4,102, which makes up 17% of all industry cases.
Commenting on the latest construction insolvency statistics Kelly Boorman, national head of construction at RSM UK, said: “Although the construction industry continued to see the highest number of insolvencies in November, we are starting to see consistency in open enquiries rather than a spike. However, this doesn’t mean the debt burden is easing yet. For companies planning ahead, access to funding will not be any easier, despite pipelines being strong, as they need to consider interest rates and cost of debt which are still a challenge.
“Stronger pipelines and ongoing funding issues could therefore place construction businesses in an overtrading trap, as it remains difficult to raise the working capital required to deliver projects. There are also ongoing labour shortages, exacerbated by increased volumes and increases to employers’ National Insurance contributions, driving up labour costs and adding further tension in the supply chain which may increase risk of collapse.”
She added: “Construction businesses are also still faced with the tail leg of legacy contracts which are costly to get over the line, taking up cashflows which weren’t forecasted to be used. While it appears things are stabilising, these cost pressures plus lack of visibility across the supply chain will cause challenges for main contractors, so we expect to see consolidation throughout the supply chain moving into 2025