Economic uncertainty creating perfect storm for construction insolvencies

In March 2025, the number of registered company insolvencies in England and Wales was 1,992, 2% lower than in February 2025 (2,032) but 9% higher than March 2024 (1,826).

The construction industry experienced the highest number of insolvencies in the 12 months to February 2025 at 4,046, making up 17% of all industry cases. 

Commenting on the Kelly Boorman, National Head of Construction at 91探花, said: “Rising inflation, tariffs uncertainty and incoming rises to employment costs are creating the perfect storm for the UK’s construction industry, which continues to experience the highest number of insolvencies. Interest rates remain high for many construction businesses, continuing to increase the debt burden, meaning any fall in activity has a significant impact on profits. Although many legacy contracts have completed, there’s still plenty of projects that have been shelved or delayed, causing a ripple effect of pressure throughout the supply chain.

“Wider geopolitical tensions have dampened market confidence and therefore led to a slowdown in growth, so we’re unlikely to see sharp cuts in interest rates. Although tariffs won’t have a direct impact on UK construction contractors, supply chains will be affected by inflated pricing of materials from overseas. In addition, the incoming increase to employers’ National Insurance contributions will squeeze margins for an industry already under-resourced but labour-intensive, especially subcontractors managing fixed-term contracts, which may aggravate the ongoing debt burden.” 

She added: “Despite current volatility, there are reasons for cautious optimism in the long term. While volumes of work take a short-term hit, pipelines are looking better due to contractors being more selective over the projects they tender for. This shift in power to contractors is driving activity and creating a more sustainable environment for businesses to win work, negotiate better terms and maintain profit margins. However, long-term growth requires government intervention. We’re yet to see the Housing Strategy, so policy which focuses on technology to accelerate delivery and alleviate labour constraints is an important change to embed.”