As the end of Q1 approaches, The UK stands at a critical juncture, grappling with the fallout from lockdowns, geopolitical tensions, and sharp rises in interest rates and inflation.

While cautious optimism exists among businesses, policymakers, and economists, significant challenges persist. The Bank of England’s recent interest rate cuts provide some relief by lowering borrowing costs, and the government’s focus on AI signals a drive for growth. However, stubborn inflation, rising labour costs, and political uncertainty continue to create a complex and uncertain landscape.

Impact on the Construction Industry

From an insolvency perspective, the construction sector is particularly vulnerable in this climate. The industry relies heavily on stable financing, manageable supply chain costs, and consistent demand—all of which are under pressure. Although lower interest rates may ease borrowing costs for construction firms, this relief could be overshadowed by ongoing inflationary pressures that keep material and labor costs high.

Rising labour costs, driven by wage demands and a competitive job market, may squeeze already tight margins. Additionally, political uncertainty could stall public sector projects and affect investor confidence in commercial developments. Construction firms with high debt loads or those operating on thin margins may struggle, increasing the risk of insolvencies.

The construction supply chain is also at risk. Insolvencies among suppliers and subcontractors can create cascading effects, leading to project delays, increased costs, and potential contractual disputes. Businesses that fail to manage their cash flow and maintain liquidity may find themselves unable to weather these disruptions. The key watchpoints will be cash flow management, debt restructuring opportunities, and strategic planning to mitigate risks and safeguard business continuity.

Updates from UK’s Construction Sector

The construction sector led UK insolvencies in 2024, with 198 cases recorded in the 12 months to January 2025. While this marked a slight drop from 201 insolvencies in the previous year and a 4.3% decrease from pre-pandemic 2019, the industry still faces significant challenges. The Insolvency Service reported that 26% (350 cases) of all self-employed or sole trader bankruptcies in England and Wales through November 2024 occurred in construction.

Rising construction insolvencies highlight the severe debt burden and distress rippling through the supply chain. The surge in M&A transactions underscores the sector’s struggle with an aging workforce and insufficient technology investments to bridge the labour gap. While many deals aim to consolidate workforces, businesses also need help raising working capital and attracting skilled talent for sustainable growth.

A slow rollout of large infrastructure projects has added to the frustration. Many firms remain in a holding pattern, waiting for government approval and navigating procurement roadblocks. Although numerous infrastructure projects are on the horizon, managing them will prove challenging as workforce consolidation and an aging talent pool strain delivery capacity.

The construction industry urgently needs incentives for technology investment, improved access to working capital, and accelerated skilled worker recruitment to meet targets. Despite hopes for falling construction costs, these expectations seem overly optimistic.

Although construction cost growth has slowed, it remains above general inflation. There has also been a 3.4% rise in residential construction costs in 2024, the highest annual increase since late 2023. While commodity prices like steel have eased, fundamental misconceptions persist about long-term cost trends. These costs are unlikely to fall in real terms, suggesting that only productivity gains can offset rising input prices, particularly wages.

The UK construction industry may see modest growth in 2025, supported by recovering construction orders and new investments in commercial and infrastructure projects. The ONS reported a 6.5% increase in new construction orders through 2024, with infrastructure and private commercial orders rising by 21.3% and 19.1%, respectively.

However, residential construction remains a weak spot. The sector, which accounted for 44.5% of total output in 2024, is expected to contract by 5.6% in 2025, limiting broader industry growth. Labour shortages compound the issue, with the CBI projecting that the problem could persist until 2026. The Construction Industry Training Board estimates the need for an additional 225,000 workers annually by 2027 to meet growing demand.

The residential sector may recover in the latter half of 2025, aligned with the government’s £11.5 billion investment in 180,000 affordable homes by 2026. Additionally, investments in renewable energy projects could bolster the industry as the UK aims to generate 70% of electricity from renewable sources by 2030 and cut carbon emissions by 80% compared to 1990 levels by 2035.

While there are glimmers of hope, the construction industry still faces a tough road ahead, with labour shortages, high costs, and sluggish project mobilisation threatening stability and growth.

Insolvency News | Acheson Construction Falls into Administration

Dorchester-based Acheson Construction has entered administration, appointing Richard Lewis and Alistair Wardell of Grant Thornton as joint administrators on February 18.

The construction firm, which had operated for over 50 years, ceased trading upon the appointment. Of its 48 staff, 40 were made redundant, with the remaining employees assisting administrators in winding down the business. Acheson’s closure marks the end of a longstanding regional employer that contributed to construction projects across the South West, the South Coast, and as far as Oxford.

Acheson Construction, which also had premises in Whiteley, near Fareham, Hampshire, was well-known for its diverse portfolio of local and regional projects. The company undertook work across various sectors, including defence, public sector, education, healthcare, leisure, commercial, industrial, and residential. Its notable projects included housing developments, schools, and the refurbishment of Dorset Museum. High-profile clients ranged from the London Organising Committee for the Olympic Games to British Rail, Mercedes, Sainsbury’s, the NHS, and HM Prisons. 

Despite posting a turnover of £53.6 million for the year ending December 29, 2023—up from £48.3 million the previous year—and achieving a modest profit of £27,898 compared to a £343,869 loss the year before, the company struggled with rising costs on fixed-price contracts, subcontractor insolvencies, and inflationary pressures.

Grant Thornton stated that current efforts are focused on supporting employees and managing the company’s affairs. The business that was impacted by increased costs primarily stated fixed-price contracts as recurring challenges for financial stability. Plus, delays in the commencement of new projects, and a dispute over amounts due did not help. While the directors explored alternative options, they concluded that continuing to trade was no longer viable. Their current priority is to support employees with claims to the Redundancy Payments Service, secure physical assets, and gather information to support any claims under existing contracts, including retention-related claims.

Insolvency News | J.S. Wright & Co Enters Administration After 135 Years

Birmingham-based mechanical and electrical (M&E) contractor J.S. Wright & Co, known for its involvement in the Grenfell Tower refurbishment, has filed for administration, signaling the end of 135 years of trading.

The firm, which became an employee-owned trust in 2021, was appointed by Grenfell’s main contractor, Rydon, to handle M&E works during the tower’s refurbishment. However, the installation of the smoke extraction system was subcontracted to PSB UK Ltd. The Grenfell Tower Inquiry did not draw definitive conclusions regarding the system’s role in the 2017 tragedy and did not criticize J.S. Wright & Co or its employees.

J.S. Wright & Co, which employed an average of 160 staff, reported a pre-tax profit of £510,000 on revenue of £41.8 million for the financial year ending April 29, 2023.

Founded in 1890 by plumber John Shivlock Wright, the company played a pivotal role in modernizing Birmingham’s Victorian slums by introducing clean air, pure water, and affordable heating to homes, schools, and factories. In recent years, the firm contributed to major residential and commercial projects, including the 37-storey Nine Elms Point and the 31-storey Indescon Tower in London, as well as phase one of the £700 million Paradise Birmingham scheme.

Despite a strong order book extending to April 2025, J.S. Wright & Co faced challenges including project delays, slippage in project timelines, and significant cost inflation. In its most recent accounts, directors acknowledged these issues and extended the accounting period by five months to September 30, 2024.

Financial pressures mounted, with cash reserves plummeting from £5.7 million to £850,000 in the 2022/23 financial year. The company’s auditor, MacIntyre Hudson, expressed “material uncertainty” about the firm’s future, highlighting a “likely shortfall in working capital.”

To address these concerns, the company secured a £1.35 million loan from former shareholders in April 2024 and arranged a covenant compliance waiver and a capital repayment holiday with bank lenders until May 2025. However, the auditor warned of risks associated with management’s financial forecasts, stating that assumptions and estimates may not prove accurate.

J.S. Wright & Co’s sister company, Wright Maintenance, has also filed a notice of intention to appoint an administrator. The smaller firm did not disclose financial details for its 2022/23 financial year. The Grenfell Tower Inquiry’s phase two report examined the building’s ventilation system during the fire but concluded that limited evidence prevented reliable conclusions about its performance.