The number of construction companies facing difficulties has increased, despite the sector being under immense pressure to deliver hundreds of thousands of new homes.
The count of firms in critical distress – an indicator of companies on the brink of bankruptcy – surged by 15.8 per cent in the second quarter of 2025, as per Begbies Traynor, while the tally of construction firms in both critical and significant financial distress topped the charts in the first quarter, with 6,830 and 97,603 firms respectively, as reported by .
"SMEs are grappling with a range of cost pressures, including strict environmental regulations and burdensome taxes on employers. These cost pressures are making it increasingly harder – not easier – to build," stated Steven Mulholland, CEO of the Construction Plant-hire Association (CPA).
The industry was the slowest growing sector of the º£½ÇÊÓƵ economy in the first quarter of 2025, and total construction output remained stagnant during this period – ending three consecutive quarters of growth as activity across real estate softened.
"Employer National Insurance hikes have already hit jobs and investment. Now, looming changes to Business Property Relief risk being the final blow – threatening 200,000 jobs and £15 billion to the economy, and punishing the very firms Britain needs to deliver growth, infrastructure and homes," added Mulholland.
"Without urgent reform, we won't just miss housing targets – we'll lose the wider supply chain capable of building the vital infrastructure Britain needs," he said.
Construction firms in 'a difficult position'
Kelly Boorman, National Head of Construction at RSM º£½ÇÊÓƵ, has cautioned that the high level of financial distress in the industry, coupled with the government's push for housing, places the sector in a precarious position.
The government has pledged billions to back housebuilders, a move largely supported by the industry, but Boorman has warned businesses could fall into an "overtrading trap". "There's the risk [they]... take on more work than their supply chains and operational capacity can support," said Boorman.
"Mandatory housing targets and expectations to commit to large infrastructure projects could result in businesses being unable to meet demand, despite the government's commitment to investment, training and pipeline visibility," she further added. Experts have cautioned that significant planning and delivery challenges remain for developers, alongside cost pressures, including skills shortages – despite recent investments – wage inflation, raw materials shortages and inflation.
