Construction worst affected by wave of insolvencies
New figures from the Insolvency Service have shown that the UK construction sector is the industry worst affected by high insolvency levels. The data has revealed that the construction sector accounted for almost a fifth of all insolvencies across sectors tracked by the Insolvency Service in the 12 months to Q1 2023.
In the year to Q1 2023, there were 4,165 company insolvencies recorded in the UK construction industry, around 19 per cent of all insolvencies recorded during the year, as construction firms faced a raft of challenges.
Over recent months, companies in the sector have struggled with issues ranging from rising costs for energy, labour and raw materials, price inflation, supply chain disruption, the need to repay government-backed emergency loans taken on during the COVID-19 pandemic and the winding back of pandemic-era restrictions on creditor action.
This broad array of adverse factors has led to dire forecasts for the sector, which the latest figures seem to indicate are proving correct. A Red Flag Alert in January of this year warned that construction could see over 6,000 insolvencies this year, with companies saddled with around £300 million in bad debt and faced with huge economic uncertainty.
At the time, Red Flag Alert’s Director of Data Mark Halstead said: “The rising costs of operation and borrowing, married with supply issues and economic uncertainty means that 2023 is a perfect storm for insolvency in the construction industry.”
Outside of the construction sector, the highest insolvency figures were seen in wholesale and retail trade and vehicle repair, which saw 3,518 insolvencies (16 per cent of the UK total) and accommodation and food services, which recorded 2,951 insolvencies (13 per cent).
During the first quarter of 2023, there were 5,747 company insolvencies recorded in England and Wales, an 18 per cent increase compared to the same period a year earlier, but down 4 per cent from the previous quarter in Q4 2022. Scotland saw 297 insolvencies (up 41 per cent from Q1 2022), while Northern Ireland saw 40 insolvencies (a 29 per cent decrease).
Read about how rising insolvencies are leading to fears that bigger companies could begin to be impacted.
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