More than half of UK construction contractors polled in a new report have said that they were involved in projects impacted by insolvency during the second quarter of the year, underscoring fears that ongoing high insolvency levels in the sector could continue to pull more companies into financial distress.
The new report from Gleeds showed that 53 per cent of contractors polled had been involved in projects affected by insolvency during Q2 2024, up from 30 per cent in Q1 and only slightly lower than the 54 per cent recorded in Q4 2024. Gleeds said that insolvencies were having an “increasingly severe” impact on projects, with some respondents reporting that their projects had been affected by a number of sub-contractor insolvencies.
Despite official Insolvency Service figures showing a month-on-month fall in construction insolvencies, the sector remains the worst affected by UK insolvencies. A recent report from AptPay found that business involved in the development of building projects were currently the most likely UK businesses to collapse, with 183 companies in administration or insolvency proceedings, according to Companies House data.
The study also found that fragile confidence in the sector was also impacting bidding. 80 per cent of companies polled said that they or someone in their supply chain had declined a tender, down slightly from 89 per cent in the previous survey. For the second successive quarter, more than a third of respondents said that they had struggled to attract an adequate number of tenderers for new projects.
Gleeds chair Richard Steer commented: “With scores of contractors and subcontractors collapsing, and interest rates and geopolitical unrest still posing very real threats to growth, there is an undercurrent of caution in the market.”
The survey was conducted during the two weeks following last month’s General Election, which saw a new Labour government come to power, with the report finding that close to 70 per cent of respondents felt that construction and real estate would be top priorities for the new government.
However, following several years in which the sector has struggled badly, the report also found that fewer than half of companies polled felt that the new government would be demonstrably better for the construction industry than the previous Conservative government.
Richard Steer continued: “While our latest report shows widespread optimism about the new government’s commitment to the industry, timelines for the commencement of big-ticket plans like those to deliver 1.5 million new homes remain unclear and faith in its ability to improve the outlook for construction and real estate in any meaningful way is limited.”
He added: “Public finances are under considerable pressure, and we’ve already seen announcements that some infrastructure schemes are to be parked by the chancellor. Until we see a more defined plan to support the sector and confidence returns amongst investors, it seems likely that construction insolvencies will remain high.”
Despite this, the survey did demonstrate some support for new government policies that have already been announced. 57 per cent believe that plans to merge the National Infrastructure Commission and Infrastructure & Project Authority would improve project delivery, while 43 per cent are in favour of building of large infrastructure projects on green belt land.
Looking forward to Q3, respondents cited interest rates and inflation, insolvencies and supply chain capacity and ongoing global tensions as being the most significant threats to the sector.
Find out more about the impact of rising insolvencies on the UK construction sector
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