Will New Construction Optimism Mean Fewer Insolvencies?

The gloomy UK economy has brought some particularly poor news for the construction sector in recent months. Not only have various segments of the industry had less work, built fewer things and employed fewer people, but this has knock-on effects for clients.

Whenever a construction firm goes under, its debt becomes a major issue for creditors, who will need the help of experts in construction debt recovery to get it back.

While this may not make the headlines in the way a collapsing construction firm might, it still has a major impact on firms across the UK that are owed money. If yours is one of them, you will be aware of what is at stake.

Is A Construction Sector Recovery In Sight?

A key measure of how the construction sector is doing is the Standard & Poor’s (S&P) Purchasing Managers Index for the sector. This denotes 50 as a score to demarcate growth and contraction. Anything above 50 is growth, anything below is shrinkage.

The latter has been a feature of recent months, with the December 2025 score of 40.1 marking the lowest score since everything ground to a halt in the pandemic more than five years earlier.

January marked an improvement of sorts, at 46.4. This still represents a decline, but it was the slowest fall in activity for seven months, raising hopes that the slump is nearing its end and better times lie ahead.

Underlying survey data indicated a growing optimism that things would soon start to improve. Business optimism was at its highest since May last year. A net 21 per cent of respondents believed output volumes will rise in the next 12 months

Among the reasons for this uptick in optimism listed by the survey were:

·       Improved investment sentiment and post-budget clarity that will help commercial construction

·       Lower borrowing costs

·       Increased infrastructure spending

However, this is still fairly thin gruel for the industry. Tim Moore, the economics director at S&P, said the survey did offer “encouraging signs that the UK construction sector has exited its tailspin”, but this is not the same as new growth, at least yet.

It could be that this will come, that the residential, commercial and civil engineering segments will all return to growth, that employment will rise and construction firms themselves will have healthier balance sheets. But it is not happening yet.

How Many Construction Firms May Go Bust In 2026?

That means the sad reality is that more construction firms will go to the wall. A report produced at the end of last summer for Begbies Traynor found there were 6,999 firms in ‘critical distress’, up 15.8 per cent year-on-year.

Since then, some of those firms will have become insolvent and others may be clinging on now.

The promise of better times ahead may mean fewer insolvency cases, but in some cases, the recovery, when it does come, will be too late, while others may be too weak to survive even when growth does return to the sector.

That means there will be a lot of companies going bust with debts unpaid and a lot of work to do to recover as much of that as possible for the creditors.