Construction business insolvencies have surged to an all-time high, according to an analysis by City AM, as escalating costs continue to push many in the sector towards collapse.
The study of corporate filings revealed that up to 840 construction firms appointed liquidators or administrators in the first four months of the year, marking an increase of over five per cent compared to last year and nearly double the pre-pandemic levels, as reported by .
Data from the Insolvency Service indicates that the sector remains the most affected by insolvencies, accounting for 19.5% of all º£½ÇÊÓƵ company failures in February, a rise of around three percentage points compared to last year and the highest proportion in three years.
The main causes of collapses in the sector are believed to be increasing staffing and materials costs, along with a growing shortage of skilled construction workers. These challenges are likely to be exacerbated by high energy costs and a rise in employer taxes.
The sector's increasing instability has also led lenders to reduce the availability of finance due to higher risk levels.
"Construction companies are going bust, they're not being sold on, so that's resulting in huge redundancies for staff," said Kelly Mitchell, managing director of advisory firm Quantuma.
She added that the common industry practice of personal guarantees by directors could also trigger a wave of personal bankruptcies.
The downfall of larger entities in the construction sector has triggered a ripple effect on numerous smaller subcontractors, who are unable to maintain cashflow to cover gaps left by the abandonment of major projects.
In September, ISG, one of the º£½ÇÊÓƵ's largest contractors with over £2bn turnover, collapsed, followed shortly by one of its lighting subcontractors, Gloucestershire-based Seventynine Lighting.
"Once one of the big boys goes under, it will take down a percentage of the companies underneath them," Mitchell commented.
"I'm in the process of putting a commercial refit business into administration and I've got three or four suppliers on the phone to me saying: 'This is going to take me under'."
Insolvency Service figures revealed that insolvency rates across all sectors in March increased by more than nine per cent compared to last year, reaching 1,992, while total compulsory liquidations for the first quarter surged nearly 15 per cent. However, they remain below the peaks seen during the 2008-09 recession.
