Construction insolvencies reached their highest level for three years in 2018, according to new figures.
Analysis by law firm Nockolds found that there were 3,156 construction insolvencies in 2018, a rise of 13% on the same period last year, when 2,792 businesses became insolvent.
Last year’s figure is the highest since 2015, when 2,634 businesses became insolvent.
The collapse of Carillion, with rising costs and political uncertainty, all helped lead to a spike in the number of businesses folding, according to Nockolds.
The firm said that while strong demand from first time buyers has supported house builders, civil engineering businesses are having a tougher time major infrastructure projects, such as Crossrail, near completion. A total of 60 civil engineering businesses specialising in the construction of roads, railways and utilities became insolvent in 2018, a 25% increase on 2017 when 48 such business became insolvent and the highest level since 2016, when there were 44 insolvencies.
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.”
“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.”
Nockolds said that higher raw material costs on the back of a weaker pound, together with rising labour costs, are also putting pressure on the construction industry.
