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  • Writer's picturePaul Andrews

Insolvency Beckons For A Number Of Construction Firms


Many construction firms are on the ropes following a bleak picture of recent company insolvencies in England and Wales.

Nicola Banham, a restructuring expert at UK top 10 accountants Azets, said: "The construction sector is bearing the brunt of tough trading conditions caused by recent record-high inflation in trades materials, supply chain turbulence, higher wage demands, labour shortages and 15-year high interest rates with rising debt levels linked to pandemic loans; many firms are on the ropes."

“Latest figures issued by The Insolvency Service make for a bleak picture - the last two quarters, up to the end of this September, saw the highest quarterly insolvency numbers for all types of businesses since the second quarter of 2009 when the economy was reeling from the global financial crisis."

“Significantly, over the same six-month period, we also saw the highest numbers of creditors’ voluntary liquidations (CVLs) since the start of the series in 1960, when Elvis Presley’s It's Now or Never was the biggest-selling single and is somewhat appropriate given the problems 63 years on."

“CVLs accounted for nearly 5,000 of the 6,208 registered company insolvencies between July and September of this year; CVLS are where directors voluntarily decide to close their business down because it has become insolvent and therefore cannot legally continue trading.”

Nicola added: “Matters are unlikely to improve soon - the CEBR think-tank estimates that 28,000 businesses could fall next year as the cost-of-living crisis continues to bite on the high street.”

According to The Insolvency Service data, there were also 735 compulsory liquidations, 466 administrations, 41 company voluntary arrangements (CVAs) and one receivership appointment.

Company insolvencies were 10% higher than the same third quarter in 2022.

The last two quarters saw the highest quarterly insolvency numbers since the second quarter of 2009 and the highest numbers of CVLs since the start of the series in 1960, The Insolvency Service reported, with the numbers of compulsory liquidations and administrations increasing to levels last seen before the pandemic.

Nicola said: “Many businesses received financial support during the 2020 pandemic and are now unable to pay the lifeline money back due to escalating borrowing costs and belt-tightening by consumers."

“To put this into context, and quoting figures from The Insolvency Service, 52.4 per 10,000 active companies entered insolvent liquidation for the year up to this September, a rise from just under 47 over the same timeframe up to September last year."

“Our advice to any directors of companies feeling the financial heat is to ensure accurate cashflow forecasting and, if the figures flash up red with no sign of long-term relief, to put their pride in their pocket and speak to a professional advisor as quickly as possible because the longer matters are left, the worse it is for them and their employees and customers.”

Based on data from The Insolvency Service, the five industries with the highest number of ‘tombstones’ in the 12 months up to the end of September this year were construction firms at 4,276, followed at 3,777 for wholesale & retail trade along with repair of motor vehicles & motorcycles, 3,477 for accommodation & food service activities, 2,282 for administrative & support service activities and 1,911 for manufacturing.

A director based in the London restructuring and insolvency team at Azets, Nicola specialises in advising directors, lenders and other stakeholders in situations involving financial distress.


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