Is the UK construction industry facing financial pressures across the sector?

UK construction insolvencies remain high entering 2026

The UK construction sector has entered 2026 facing continued financial pressure, with insolvency levels remaining elevated despite some recent signs of stabilisation.

Latest figures show construction insolvencies fell to 297 cases in November 2025, down from 362 in October and lower than the 321 recorded in the same month last year. While this reduction is encouraging, it does little to alter the broader risk profile across the industry.

Over the past 12 months, the sector recorded 3,950 insolvencies, the highest of any UK industry, accounting for 17% of all company failures nationwide.

Financial distress across construction remains widespread

Formal insolvencies represent only part of the challenge. Levels of financial distress across the construction sector remain high, with more than 102,000 companies classified as being in “significant” distress during Q2 2025; a 14% increase year on year. Almost 7,000 businesses were identified as being in “critical” distress, indicating an elevated risk of insolvency.

Specialist trades continue to feel the greatest impact, particularly plumbing, heating and air-conditioning contractors, electrical and finishing trades, and design and development services.

What pressures are businesses facing?

A combination of structural and short-term factors continues to weigh on performance across the sector:

• Cost inflation: Ongoing increases in labour, materials, insurance and compliance costs continue to erode margins.
• Cashflow pressure: Delayed payments and slow certification remain persistent issues, with 34% of family-owned construction firms concerned about meeting cash obligations over the next 12 months.
• Labour shortages: Around two-thirds of firms report ongoing recruitment difficulties, particularly for skilled roles.
• Overtrading risk: In an effort to maintain turnover, some businesses are accepting contracts beyond their financial or operational capacity, increasing exposure to cashflow failure.

Construction output continues to decline

Construction output fell by 1.1% in the three months to November 2025, the steepest decline since early 2023. Private housing repair and maintenance, a key market for many SMEs, fell by 3.7% over the same period.

According to the S&P/CIPS Construction PMI, December marked the sector’s 12th consecutive month of contraction, representing its weakest sustained performance since the global financial crisis. Housebuilding remains the poorest-performing area.

Looking ahead: managing construction insolvency risk in 2026

While some short-term stabilisation is emerging, insolvency risk across construction remains elevated as businesses enter 2026 with limited headroom.

Maintaining robust cashflow forecasting, disciplined project selection and strong financial controls will be critical. Early identification of pressure points, particularly around working capital, contract exposure and customer risk, can significantly improve outcomes.

How Bishop Fleming supports your businesses

Bishop Fleming has significant experience supporting construction businesses through periods of financial distress, restructuring and insolvency. In recent years, we have advised on some of the South West’s largest construction failures, including Henry W Polland & Sons Limited and Brady Construction Limited.

Our specialist construction and insolvency teams work closely with directors, lenders and stakeholders to provide clear, practical advice, from early warning reviews through to formal insolvency solutions, helping businesses navigate uncertainty and make informed decisions in challenging market conditions.