The construction sector continues to face significant financial distress. The latest insolvency statistics for October 2024 reveal ongoing challenges for businesses in the sector. While overall company insolvencies in England and Wales fell by 10% compared to September, and 24% compared to the same month last year, construction remains the hardest-hit industry.
Moreover, in the 12 months leading up to September 2024, a staggering 4,264 construction businesses entered insolvency. This alarming figure highlights the ongoing impact of rising costs, labour shortages, and cash flow difficulties. All of which are creating a precarious scenario for companies of all sizes.
Why is the Construction Sector Struggling?
Several factors are contributing to the surge in construction-related insolvencies:
- Workforce Shortages: Major firm collapses have caused disruptions across multiple sites, with a reduced workforce unable to meet project demands.
- Cash Flow Pressures: Small subcontractors and suppliers, essential to the construction supply chain, often struggle with late or overdue payments. This creates a ripple effect, increasing cash flow challenges and risks of insolvency.
- Rising Costs: The rise in National Insurance and the uplift to the National Minimum Wage are adding further strain to SMEs, alongside high material and labour costs.
- Uncertainty Despite Government Support: While measures announced in the Autumn Budget provide some optimism, concerns remain about an insolvency domino effect throughout the supply chain.
Kelly Boorman, national head of construction at RSM UK, notes:
“Main contractors are looking to mitigate the risk of insolvency cascading throughout the supply chain by supporting earlier payment terms to prevent further cash flow issues hitting smaller subcontractors and suppliers. We’re therefore seeing enhanced due diligence being performed on the supply chain to understand financial viability and the subcontractor ability to deliver the contract. In addition, it will be interesting to see how industry responds to last month’s Autumn Budget and allocated funding to stimulate construction activity.”
How IL Advisory Can Help Your Business Recover
At IL Advisory, we understand the immense pressure construction businesses face in today’s volatile economic landscape. Therefore, whether you’re a business struggling with overdue invoices or a supplier feeling the pinch of delayed payments, our expert team is here to help you recover what you’re owed and improve your cash flow.
Our Specialised Services Include:
- Overdue Invoice Recovery: Chasing late payments can be time-consuming and frustrating. We streamline the process to secure prompt payment and free up your cash flow.
- Debt Recovery for the Construction Sector: With a deep understanding of the unique challenges construction businesses face, we tailor our recovery strategies to ensure maximum success.
Proactive Steps to Safeguard Your Business
The insolvency challenges plaguing the construction sector highlight the need for proactive measures to safeguard your business. Here are some key steps you can take:
- Strengthen Payment Terms: Ensure your contracts include clear payment schedules and penalties for late payments.
- Monitor Cash Flow Closely: Regularly assess your cash flow to identify potential issues early and take corrective action.
- Perform Due Diligence: Before entering into agreements, conduct thorough due diligence checks on clients, suppliers, and subcontractors.
- Seek Professional Support: Partnering with a specialist like IL Advisory ensures you have expert guidance to recover overdue invoices and protect your business from insolvency risks.
Don’t Let Overdue Payments Derail Your Business
The construction sector is the backbone of the UK economy. However, without timely payments and strong cash flow management, even the most resilient businesses can struggle to survive.
IL Advisory is committed to helping businesses in the construction sector navigate these challenges. If overdue invoices are holding your business back, don’t wait. Contact IL Advisory today at info@iladvisory.com and let us help you recover what you’re owed.