Construction Industry Still Struggling With Insolvencies

The latest figures to be released by the Insolvency Service show that, when broken down by industry, the construction sector is leading the way when it comes to the number of insolvencies recorded in 2025. 

According to the data, 17 per cent of all insolvencies in the 12 months to November last year were in the construction sector. This equates to 3,950 companies entering the formal insolvency process. 

Wholesale and retail trade, as well as businesses offering accommodation and food services also saw high rates of insolvency last year, standing at 16 per cent and 14 per cent of the total number respectively. 

What problems do company insolvencies cause in the construction industry?

If a business enters into insolvency proceedings, either voluntarily or due to a compulsory order, it can result in the entire workforce being laid off and therefore mean that all activity being carried out by that company ceases. 

One of the challenges for the construction industry is that large projects often rely on multiple contracting organisations to complete them. Therefore, if one of the companies that is contracting on a project becomes insolvent, it can have a knock-on impact on the rest of the project.

The construction industry is also well-known for using sub-contractors. If a larger organisation goes into administration, it may not be able to pay all of its sub-contractors in full, which can create cash flow issues for those businesses. 

What can you do if a company that owes you money becomes insolvent? 

It’s important to note that under UK law, creditors (i.e. the people who are owed money) take precedence over shareholders and others with an interest in the business. That means if there is money available, you have a reasonable chance of receiving at least some of what you’re owed.

However, there is no guarantee that you will get all the money you are owed in such a situation, because creditors are arranged in a hierarchy which determines whose debts get repaid first.

In such cases, the insolvency practitioners will sell off the assets of value and use the money raised to repay as many of the company’s creditors as possible. 

Sometimes insolvency proceedings lead to a company going into administration, which means specialist administrators are appointed to manage the business and do all they can to keep it running. 

This is usually better news if you are one of the company’s creditors, as it gives the organisation an opportunity to earn the money it owes you. 

However, all of these procedures can take time, which means if you are relying on a debt being repaid promptly to maintain positive cashflow in your business, the knock-on effect can be significant. 

This is why it’s advisable to work with specialists in construction debt recovery to help ensure you receive what you are owed as quickly as possible. Ideally, you should keep on top of your debt collection activity to prevent another company’s insolvency from affecting your business.

By regularly chasing up unpaid invoices, you are managing your organisation’s finances responsibly and ensuring you have the cashflow required to continue operating.