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Wed January 26 2022

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Carillion effect sees construction insolvencies rise 13%

1 Feb 19 There was a 13% increase in the number of construction companies going insolvent in 2018.

Number of construction sector insolvencies since 2015
Number of construction sector insolvencies since 2015

Total construction insolvencies in 2018 reached 2,954 companies, which was the highest figure since 2015, according to data collected by law firm Nockolds.

Nockolds said that the fallout from the collapse of Carillion at the start of the year, together with rising costs and political uncertainty, had led to a spike in construction businesses folding.

Charlotte Barker, head of construction at Nockolds, said: “The shockwaves from the collapse of Carillion are still reverberating around the construction sector supply chain. Many businesses were dependent on Carillion for a significant proportion of their revenues and some have gone to the wall as a result.

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“Large construction companies are usually able to squeeze the margins of smaller contractors and subcontractors in the supply chain. This leaves them with very little wriggle room in the event of an insolvency higher up the supply chain.

She added: “Uncertainty around Brexit and concerns over the economy are dampening commitment to major new infrastructure projects. At the same time mega projects, such as Crossrail, are nearing completion, which is impacting demand in the civil engineering subsector.”

Higher materials costs on the back of a weaker pound, together with rising labour costs, are also putting pressure on the industry, she said. “The impact of Brexit on labour supply in the construction sector is starting to be more keenly felt. Many construction workers are from countries like Poland, which are booming at present, which means fewer workers are coming to the UK and many are returning home. This is pushing up pay and putting margins under pressure.”

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