Rising Materials Costs Deepen Insolvency Risk in UK Construction Sector

The UK construction sector is facing intensifying financial pressure as the latest government data reveals a sustained decline in the production of key building materials. 

This downturn, coupled with inflationary pressures and data gaps in price tracking, is contributing to heightened insolvency risk, particularly among small and medium-sized enterprises.

Production Declines Across Core Materials

The Department for Business and Trade’s Building Materials and Components Statistics: August 2025 highlights a notable contraction in production:

• Cement output fell by 5.3% year-on-year to 7.3 million tonnes.
• Sand and gravel sales dropped 2.9% quarter-on-quarter and 3.2% year-on-year.
• Ready-mixed concrete sales declined 4.3% quarter-on-quarter and 4.7% year-on-year.
• Brick deliveries rose 9.0% year-on-year but remain 18% below pre-pandemic levels.
• Concrete block deliveries fell 0.1% year-on-year and 1.9% month-on-month.

These figures reflect a broader stagnation in construction activity and signal potential stress points for suppliers and contractors reliant on consistent material flows.

Insolvency Risk: A Legal and Commercial Concern

The decline in production coincides with persistently high insolvency rates in the construction sector. Recent data from the Insolvency Service indicates over 2,000 company insolvencies in July 2025 alone, with construction firms disproportionately affected. 

Insolvency practitioners, lenders and legal advisors, must remain alert to the signs of financial distress in the sector. Contractual renegotiations, payment disputes, and supply chain disruptions are likely to increase as firms struggle to absorb rising costs without reliable pricing benchmarks.

The combination of falling production, rising costs, and regulatory uncertainty presents a volatile landscape. As such, those in the construction industry should consider reviewing force majeure and price escalation clauses; monitoring supplier solvency and credit risk; and preparing for increased restructuring and insolvency activity.

“The current volatility in material costs continues to cause a strain in the negotiation and management of construction contracts. Whilst contractors face mounting pressure to deliver within fixed budgets, developers and funders are increasingly seeking legal mechanisms to help manage risk but preserve cash flow. As a result, we are seeing a clear uptick in renegotiations and contingency planning across the board.” Robert Tunningley, Partner, Real Estate, Irwin Mitchell”