turner & townsend

Insolvency risk threatens UK construction industry, according to new report

Increased insolvency could rival inflation as the main threat to the UK construction industry, warns global professional services company Turner & Townsend.

According to its latest ‘UK Market Intelligence Report’ (UKMI), the construction industry has suffered more company failures than any other sector, with a 72.1% rise in insolvencies year-on-year to Q2 2022.

During the year to Q2 2022, 3,850 construction firms across England, Scotland and Wales became insolvent — accounting for almost one-fifth of all company insolvencies.

With the government’s Covid support measures — including furlough and temporary insolvency protections — now withdrawn, firms that were at risk of insolvency before the pandemic are increasingly more exposed.

With almost all construction firms classified as SMEs — many of which have been accruing an increased amount of debt — the industry will likely have a high number of overly leveraged contractors particularly at risk of insolvency.

Martin Sudweeks, UK managing director of cost management at Turner & Townsend, said: “Businesses need to be more alert to insolvency risk across their supply chains as the long-term impact of the pandemic begins to sink in and the fiscal crutches offered by government are removed.

“It’s essential to spot the tell-tale signs of insolvency risk early — those include low productivity, difficulty securing labour or materials, and failure to pay suppliers.

“To be prepared, build trust and open communication within your supply chain.”

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