At the start of 2025, falling inflation and clarity following the UK general election gave businesses a brief sense of stability. However, that optimism faded quickly as fresh economic headwinds emerged. In the middle of Q2, contingency planning and restructuring for larger companies is ongoing, and at the same time, smaller businesses that lacking access to liquidity and expert advice continue to struggle.

The construction industry remains the hardest-hit sector in the UK economy, with insolvency figures continuing to rise. According to The Insolvency Service, 4,046 construction firms went under in the 12 months to February, accounting for 17% of all insolvencies across industries. In February alone, 367 construction firms entered insolvency, marking the highest monthly figure since last year. 

Despite making up 14% of all registered businesses in the UK in 2024, the construction industry bears a disproportionate share of insolvencies: evidence of its ongoing vulnerability in a volatile market. In Scotland, the data shows a similar trend. Construction accounted for 13.55% of all 118 insolvency cases reported up to March 2025.

Inflated material prices due to global supply chain issues, especially following US tariffs on Chinese goods, have severely impacted businesses all across. Although UK contractors aren’t directly hit by tariffs, they face the ripple effects of rising import costs. Compounding this, increased employer National Insurance contributions are squeezing already-thin margins, especially for subcontractors and labour-intensive roles.

Negative Impact on the Business Confidence

Business sentiment across the UK has deteriorated sharply, particularly in construction. Lloyds’ Business Barometer for April 2025 showed the construction sector had the lowest confidence levels across the four industries surveyed. This has been its weakest reading in more than two years.

The decline is largely attributed to geopolitical uncertainty and negative sentiment around the UK’s economic trajectory. A renewed trade war, sparked by President Trump’s imposition of tariffs on Chinese imports, has stoked fears of prolonged supply chain disruption. At the same time, the UK’s rising labour costs and ongoing skills shortages are compounding operational pressures.

According to Lloyds’ senior economist Hann-Ju Ho, it’s “unsurprising” that confidence is suffering amid such instability. While the Labour government has pinned hopes on planning reforms to spark a construction revival, the Office for Budget Responsibility (OBR) suggests any meaningful uplift may be slow to materialise. 

Is there a Silver Lining?

In short, yes. For business buyers and investors who have capital or capacity, Q2–Q3 2025 is a rare window to pick up distressed construction assets at rock-bottom prices, with housing demand and government policy set to drive the rebound. Here’s what’s not being talked about: 

Stalled Projects = Big Opportunities: The collapse of major contractors like Henley Construct has left housing associations holding the bag, with part-completed developments and millions in sunk costs. These assets are now effectively stranded. Planning permission is already secured, making these sites low-barrier for reactivation. Local authorities and housing bodies are under pressure to get units built, meaning they’re far more flexible on timelines, conditions, and JV structures. 

For investors or developers who understand planning, procurement, and have operational teams ready, this is arbitrage territory: buy cheap, de-risk quickly, and unlock substantial upside.

Clean Acquisition of Live Contracts: Many tier-two firms that went into administration still had active frameworks, particularly with public sector clients. Be it via asset sales, IP rights, or phoenix structures, there’s potential to take over these contracts without legacy liabilities. Plus, can sometimes be transferred, saving years of relationship-building and vetting. In some cases, there are even mobilised sites ready for work, needing only a solvent party to take over.

Hidden Margins in Materials & Labour: Some failed firms companies may already have

legacy supply contracts that can be inherited through administration, effectively letting buyers jump the procurement queue and reduce material cost inflation. Skilled subcontractors already familiar with the sites and scopes can often be retained, accelerating delivery and reducing onboarding risk. If managed correctly, these built-in advantages translate into direct margin expansion.

Low Confidence = Less Competition: Lloyds’ April Business Barometer showed the sharpest drop in construction confidence in over two years.  Fewer bidders means lower deal competition and more flexible administrators or lenders. Founders exiting under distress may be open to performance-based earnouts or creative structures just to preserve their name and team.

The case study below highlights the value of acquiring and turning around distressed businesses. 

Case Study: Debt, Downfall, and Recovery – The Tilbury Douglas Story

Tilbury Douglas, formerly the construction arm of the major UK services and construction company Interserve plc, represents a significant turnaround story within the challenging construction sector. The company faced severe financial distress and entered administration in March 2019. 

Problem

The downfall in 2019 stemmed from a combination of factors: loss-making energy-from-waste contracts, unsustainable levels of debt accumulated through acquisitions and operational challenges, and a subsequent loss of investor confidence. This culminated in the company entering administration. The construction division, while possessing a strong operational base and order book, was inherently linked to the financial instability of the parent company.   

Solution

The survival and subsequent success of the construction division were achieved through a series of key strategic actions:

Pre-Pack Administration (2019): A pre-arranged deal saw the sale of Interserve’s core operating businesses, including the construction arm, to a new company owned by lenders, Interserve Group Ltd. This effectively shielded the viable construction business from the parent company’s debts.

Rebranding to Tilbury Douglas (2021): The construction and engineering services businesses were rebranded as Tilbury Douglas, leveraging a respected historical name to create a fresh start and distance itself from the negative connotations of the Interserve plc administration.   

Becoming a Standalone Entity (2022): Tilbury Douglas fully separated from Interserve Group Ltd, gaining independence in its strategic direction and operational management. Experienced leadership focused on core competencies in regional building, infrastructure, engineering, and fit-out, coupled with improved financial discipline and governance.

Impact

Financial Recovery: By 2023, the company reported a turnover of £507 million and a pre-tax profit of nearly £6 million, a stark contrast to the financial distress experienced under its former parent company. This positive trend continued with increased revenue to £541.6 million and operating profit of £11.5 million in 2024.   

Strong Order Book: The order book exceeded £1 billion in 2023 and continued to grow, reaching over £1.32 billion by March 2025, securing future workload and demonstrating client confidence.   

Sustainable Growth: Operating as a debt-free, standalone entity with a strong cash position, Tilbury Douglas has established a foundation for sustainable growth within the UK construction sector.   

Preservation of Expertise and Employment: The pre-pack administration and subsequent restructuring saved a significant portion of the construction business and the jobs associated with it.

Insolvency News | Legal Claims Launched Over ISG Redundancies

The collapse of major contractor ISG has taken another turn, as 1,650 of its 2,400 former employees have filed Protective Award claims. This is a legal mechanism used when employers fail to carry out their statutory duty to consult staff before mass redundancies.

This surge in legal action was disclosed in a recent update at Companies House from EY, the administrator overseeing ISG’s insolvency. The claims suggest that the company did not conduct the required collective consultations prior to making large-scale job cuts, a breach of UK employment law under the Trade Union and Labour Relations (Consolidation) Act 1992.

If each claimant is awarded the maximum of £5,600, the RPS could face a payout of over £9 million, placing additional strain on an already stretched safety net designed to protect workers affected by business failures. This comes at a time when construction sector insolvencies remain disproportionately high, and government-backed schemes are being increasingly relied upon to cover redundancy liabilities.

This mass filing represents more than just a legal matter. It highlights a growing trend in employee activism and awareness of legal rights in the wake of contractor collapses. For business owners, it serves as a stark reminder of the importance of adhering to employment law, particularly around redundancy consultation and procedural fairness during restructuring or insolvency.

Insolvency News | Spanwall Facades Files for Administration

Spanwall Facades Limited, a Belfast-based manufacturer of architectural wall cladding and building facades, entered administration earlier this month, with Stuart Irwin and Ian Leonard from Interpath Advisory appointed as joint administrators.

On April 17, 2025, the High Court of Justice in Northern Ireland issued an order for the appointed administrators to oversee the company’s affairs. Following the appointment, Spanwall Facades Limited immediately ceased trading.

In the company’s financial statements for the year ending December 31, 2023, its fixed assets were valued at approximately £470,000, while its current assets stood at £3.1 million. The company’s total equity was recorded at around £1.1 million.

Since the appointment, the Joint Administrators’ primary objective has been to engage with all relevant stakeholders, including customers, creditors, suppliers, and employees, to ensure a smooth and orderly wind-down of the company. Their efforts are focused on managing the company’s remaining obligations and facilitating the closure process as efficiently as possible.