UK Construction Insolvency Rates Remain High in 2025
Despite a modest improvement from 2024, the UK construction sector remains under significant financial pressure in 2025, with insolvency rates still elevated and specialist firms most at risk.
The UK construction sector continues to experience the highest number of company insolvencies of any industry, according to the latest official figures from the Insolvency Service. Unfortunately, the outlook remains uncertain amid ongoing economic headwinds.
Insolvency Figures:
In the 12 months to July 2025, 3,973 construction companies in England and Wales became insolvent.
The insolvency rate for construction companies in the year to August 2025 was 52.6 per 10,000 companies, down from 55.5 per 10,000 the previous year, but a 23.5% increase compared to pre-COVID19 levels. However, the levels are still well below the peak of 113.1 per 10,000 as seen during the 2008/9 recession.
Sector Breakdown and Economic Factors:
Specialist construction firms, such as subcontractors in demolition, electrical, and finishing trades, appear to remain the most affected.
In July 2025 alone, 195 specialist firms became insolvent, the highest among all construction sub-sectors.
There appears to be a broader geographic spread of financial distress, with key drivers including legacy pandemic debt, delayed investment, supply chain costs, and rising employment expenses.
Market Outlook:
Whilst the overall number of insolvencies has fallen year-on-year, the trading environment remains challenging.
High interest rates, inflation, and labour shortages continue to squeeze margins, especially for SMEs. Without improved access to funding and sustained growth, the sector could face further instability.
“The construction industry continues to face significant financial headwinds, with insolvency rates remaining stubbornly high despite a slight year-on-year decline. Rising costs, labour shortages, and legacy debt from the pandemic are creating a perfect storm for many firms—particularly SMEs and specialist subcontractors. While some resilience is emerging, the sector remains fragile, and we’re seeing increased demand for legal support around restructuring, dispute resolution, and contract risk management.” Doug Robertson, Partner at Irwin Mitchell”
