Insolvencies have been rising across the UK due to ongoing economic uncertainties, now compounded by the recent appointment of a new Labour government. In the dynamic business landscape, the severe financial distress of the construction industry has remained consistent, reaching its highest levels since 2023 and making it the worst-performing sector in the UK.

Currently, one in six insolvent businesses falls within the construction space. Insolvencies in this sector are significantly higher than those during and in the five years before the COVID-19 pandemic. What does this trend mean for business buyers looking to capitalise on distressed assets? Let’s explore.

UK’s Construction Industry: Overview

The construction industry recorded the highest number of insolvencies in the 12 months leading up to June 2024, surpassing 4,500. All types of company insolvencies increased compared to June 2023 and May 2024.

Since 2021, over 10,270 construction firms in the UK have gone under, marking the highest rate in a decade. In the year leading to June 2024, more than 2,500 (58%) were specialist subcontractors and more than 1,600 (37%) were main building contractors.

In May 2024, 354 construction firms went out of business, with 211 being smaller companies. This trend of smaller firms failing was also seen in preceding months, and has remained consistent over this quarter. Regionally, Greater London, South East London, and East London have been the most affected. These areas have the highest concentration of construction businesses due to significant urban development, large infrastructure projects, and high population densities.

Insolvency patterns in construction align with those of the previous year, driven by soaring inflation, high materials costs, reverse charge VAT, late payments, and a downturn in activity. Recent examples of companies affected include JDL, Rye Demolition, Osborne Group, and McCormack Demolition.

Specialist subcontractors remain particularly vulnerable due to high costs, tight margins, and market volatility. Although inflation shows signs of easing, businesses continue to face challenges such as high interest rates, extended payment terms, accumulated debt, and reduced cash flow from legacy contracts.

Insolvency experts predict these numbers will rise further this quarter. However, government support could help reverse this trend. The new government’s commitment to economic growth through mandatory housing targets and planning reform could support distressed businesses and protect labour. Reforming payment terms and improving access to funding, particularly for smaller and newer businesses, is crucial to bring some much needed stability. 

Construction News | Blenheim House Falls Into Administration

Surrey-based contractor Blenheim House has entered administration after 28 years in business. Adam Stephens and Kevin Ley from Evelyn Partners were appointed as joint administrators on 18 July. The firm owed £13.4m to trade creditors and employed about 80 people.

Blenheim House struggled with the impacts of COVID-19 and the war in Ukraine, reporting its first-ever loss in February. It filed for administration a week after receiving a winding-up petition from dry-lining and fit-out subcontractor Radius Construction.

Blenheim House specialised in refurbishment and fit-out projects in London and the South East. Ongoing projects included 25 Moorgate, a 6,700 square meter office development near the Bank of England, and a mixed-use scheme on the site of a former sweet factory in Haringey, North London. The company also recently worked on projects in London’s affluent areas, including Marylebone and St James’s.

The firm had recently acquired new clients and hoped to secure more work after expanding into new sectors, forecasting a similar turnover and low profit margins for the year ending April 2024.

In a statement last week, the board of directors cited “an unprecedented catalogue of problems” that had “depleted [its] once healthy balance sheet.”

Despite a turnover increase from £67.8m to £86.5m in the year ending 30 April 2023, the firm posted a pre-tax loss of £137,000. Blenheim House attributed the loss to costs and delays caused by some subcontractors going out of business.

No other comments about the insolvency proceedings have been made so far. 

Construction News | Liquidation Underway for Hollins Homes

The North West housebuilder Hollins Homes has gone bust with liabilities totaling £11.2m.

Founded in 2015 by lawyer Stephen Goodman, Hollins Homes is now being liquidated after several of its projects stalled. Earlier this month, Place North West reported that the company was on unstable footing following the collapse of several of its special purpose vehicles (SPVs).

Two SPVs set up to deliver projects in Lancaster and Garstang, totaling around 140 homes, were placed into administration by debt provider United Trust Bank. In total, six entities connected with Hollins Homes projects have entered administration or liquidation in the past month.

Hollins Homes, which employed 15 people, is now being wound up. Documents filed with Companies House show the company has total liabilities of £11.2m. The majority of this, £9.4m, is owed to companies connected to Hollins Homes. Slightly more than £1m is owed to trade creditors, and nearly £600,000 is attributed to directors and shareholders, with Goodman owed £196,000 according to a statement of the company’s affairs.

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