Construction insolvencies creep up in September

Insolvencies in the construction sector increased from August to September, as civil engineering continued to feel the pinch.

According to the latest monthly Insolvency Service data, 2,029 business failures were recorded in September, including 291 construction firms.

That is a slight increase on the 290 construction firms that went under in August, but less than the total of 294 in September 2024.

Construction had the second-highest number of insolvencies during the month, closely behind the wholesale and retail trade in motor vehicles and motorcycles, which saw 309 firms collapse.

But it had the most insolvencies in the 12 months to September 2025, with 3,933 going under – equivalent to 17 per cent of all firms in the UK that folded.

Second behind construction was the wholesale and retail trade in motor vehicles and motorcycles, where 3,749 collapsed.

Jo Streeten, managing director of Aecom (Building + Places), said the year-on-year improvement in the number of construction insolvencies was “encouraging”, although the monthly rise suggests “pressures remain uneven across the sector”.

She warned that Rachel Reeves, the chancellor, faces “difficult decisions” in next Wednesday’s Autumn Budget.

“The industry will be looking for steady leadership and practical measures that unblock delivery rather than adding further uncertainty,” she said.

Mark Supperstone, partner at S&W, said the slight rise in monthly collapses “shows continued weakness” in the construction sector. 

He pointed to recent Purchasing Managers’ Index (PMI) stats that showed the civil engineering and housebuilding sectors struggling in particular. 

Earlier this month, S&P, which compiles the PMI, found that the sector is in its longest period of decline since the financial crash of more than 15 years ago.

Supperstone also pointed to the upcoming budget, warning that the sector was “bracing for potential tax changes and reduced reliefs that could further squeeze margins”.

It is already facing pressure from rising energy prices, employment costs and transport expenses, and tax increases “could worsen this pressure”.

“While lower borrowing costs and government commitments to energy and housing projects offer some optimism, uncertainty around fiscal policy continues to weigh heavily on sentiment,” he said.

Supperstone advised construction firms to maintain “tight control over cashflow” and seek expert advice early.

David Kelly, head of insolvency at PwC, said the construction sector has been impacted by rising costs, tighter credit and heightened uncertainty.

“Within many corporates there is an increased focus on cost control and cash generation,” he said, adding that credit-control departments were taking a “tougher line” with customers.

Kelly also suggested that more businesses could face distress as the sector heads into 2026.