Insolvencies in the construction sector have jumped in the last month as the UK’s cost of living crisis starts to bite for businesses says Mazars, the international audit, tax and advisory firm.
New data from the Insolvency Service shows that 67 construction businesses went bust in February 2022, the highest figures since before the pandemic and up 22% on the number that closed in January.
Mazars says that Britain’s cost of living crisis is now starting to bite for businesses as well as consumers, with the sharply rising cost of construction materials and energy bills pushing more already-struggling construction firms into insolvency.
Many construction contractors already operate on very thin margins and have to deal with issues of late payment by their clients. Even a small rise in costs can be enough to trigger a rise in insolvencies.
Creditors are also now able to file winding-up petitions against businesses that owe them more than £750, after the level of debt was increased to £10,000 during the pandemic. This is also driving up the number of construction businesses closing.
Mike Pallott, Partner in the Restructuring Services team at Mazars, says: “Britain’s cost of living crisis is hurting not just households but businesses too.”
“Construction businesses are facing a very tough period. With inflation not yet under control, cost and supply chain pressures are going to get worse for the sector before they get better.”
“With no more Government protection from creditors, we’re likely to see insolvencies continue to rise in the construction industry.”
