Why UK Construction Firms Fail: What 138 Insolvency Reports Say

The short version

We read the insolvency reports for the larger UK construction firms that have failed since 2010 and recorded the reasons each one gave. Counting each group once, 138 reports explained why the business failed: 131 administrators' proposals, six liquidators' reports and, for Carillion, which had no administrators, the Parliament committee report.

• Loss-making contracts were the most common cause. 60% mentioned losses on particular jobs, and for 43 firms it was the main reason.
• Almost every failure ended in a cash crunch. 88% described cash flow pressure, usually as the result of something else.
• Other people's problems spread. 40% said clients didn't pay, paid late or went bust themselves.
• Lenders and insurers pulled back at the end. 43% said funding was refused or withdrawn.
• Inflation is the story of the last three years. It featured in 54% of failures since 2023, against 38% across the whole period.
• The accounts often looked fine. 58% of the firms showed a profit in their last accounts before they failed.
• Unsecured creditors, including subcontractors, usually lose. In at least 69 of the 118 cases with an estimate, the insolvency practitioners expected little or nothing for them.

How we did it

Our failures register lists the larger UK construction businesses that went into administration or liquidation. For each one with administrators' proposals at Companies House, we took the section explaining the background and events leading to the appointment. For the rest, we read the first liquidators' progress report or proposal for a voluntary arrangement where one was filed; most of these say little about why the company failed, so only six added reasons. Compulsory liquidations run by the Official Receiver file no narrative at all. We recorded every reason it gave from a fixed list, the main reason, and whether the business was sold. Every coding is backed by an exact line from the report. Where several companies in a group failed together and shared one report (ISG, Inland, FK Group, Pochin and others), we counted the group once.

Proposals record the administrators' and directors' account of what happened. They are not findings of fault, and the directors' view is often included.

The reasons, ranked

Firms usually gave several reasons, so the shares add up to more than 100%. For about one in three, losses on particular contracts were the main reason:

What the reasons look like in practice

Losses on particular jobs. One or two contracts going badly wrong is the most common start. Tolent's £85m Milburngate scheme in Durham overran by about £10m. S&T's £30m Heathrow hotel fit-out left about £17m unbilled, with only £1.25m recovered after adjudication and litigation. Styles & Wood lost heavily on a few refurbishment jobs, mainly India Buildings in Liverpool, then lost its largest framework.

Cost inflation on fixed prices. Since 2021, contractors that agreed fixed prices before costs rose have carried the difference. Readie Construction's fixed-price contracts were hit by post-Covid and Ukraine war inflation and by subcontractors failing. Jehu Project Services reported cost rises of more than 25% on fixed-price, low-margin work. Geoffrey Osborne described about 30% cost inflation on its London projects.

Clients not paying, or failing. Failure spreads down the chain. Vidi Construction's main client went into administration in 2024 and more than half its projects stopped. Bowie Construction's recovery stalled when two main clients withheld payments. Aspin Group's problems included bad debts from Carillion.

The money runs out. When losses mount, lenders and insurers step back. Michael J Lonsdale had no borrowing for most of its 37 years, but when insurers cut its credit rating in 2023, two £15m loan offers did not complete in time. Norstead's main funder withdrew. Midas Construction's bank did not renew its overdraft.

Legal claims. Building safety claims are a newer cause. After Ardmore Construction failed, the group faced Building Safety Act claims, and Crest Nicholson won an unpaid fire safety judgment against it.

How the causes have changed

Covid dominated 2020 to 2022. Since 2023, inflation on fixed-price work and lenders pulling back have taken over. More than half of the reports we coded are from 2023 onwards.

What subcontractors should take from this

The accounts are not enough. 58% of these firms showed a profit in their last accounts, and 29% had accounts made up more than 21 months before they failed. Read the accounts, but also look at payment behaviour, filing history and what you hear on site.

Watch for the signals that come before the end. The reports keep mentioning the same late signs: credit insurance withdrawn, suppliers moving to shorter terms or payment up front, winding-up petitions, and HMRC time to pay deals. If your credit insurer cuts cover on a customer, act on it.

Your client's client matters. Almost half the failures involved clients not paying or failing themselves. A main contractor that depends on one big client, or one big job, passes that risk on to you.

Assume you will not get paid if it fails. In at least 69 of the 118 cases where an estimate was given, they expected little or nothing for unsecured creditors. The only real protection is not letting a large debt build up: apply on time, use payment and pay less notices, adjudicate early and claim statutory interest when you're paid late.

How to check a contractor

• Payment record: average days, the share paid late and how both are changing, on our payment league table.
• Profit margin: the profit league table shows how thin each company's margin is.
• Filings and notices: late accounts, new lender charges and Gazette notices show up in each company's CR Signals.
• Your exposure: the cash tied up calculator shows how much a job could leave you owed if the contractor failed.

Figures used in this report

• 197 reports read (151 administrators' proposals, 45 liquidators' and other reports, and the Carillion committee report); 138 groups with stated reasons
• 65 of 112 firms with accounts figures showed a profit before tax in their last accounts
• 40 of 138 had last accounts made up more than 21 months before they failed
• 38 of 197 had all or part of the business sold on or soon after appointment
• At least 69 of 118 with an estimate expected little or nothing for unsecured creditors
• By year of failure: 2010 to 2019, 28; 2020 to 2022, 36; 2023 to 2026, 74