Fear of rising insolvencies
The UK construction industry reported more than 4,000 insolvencies in Q1 2023. And that tide of bad news shows no signs of stopping.
Within the next few weeks, the English football league will draw to a close.  We will see which teams failed to amass sufficient points and that have subsequently been relegated.  And we will find out which teams are to be crowned champions having finished the season atop their respective league table.
We do not have to wait weeks to discover which team sits atop the UK insolvency league table, however.  The champions of that particular league for the first quarter of 2023 has already been decided.  And the dubious honour goes to the construction industry, which has seen more than 4,000 of its number fall by the wayside since the beginning of the year.
The reasons behind the deluge of insolvencies will be many and varied.  Some will have fallen victim to economic shifts that have seen the price of fuel, materials and wages sky-rocket.  Some may have been propped up by Coronavirus Business Interruption Loans that gave them a sense of hope and security during the pandemic, only to discover that sense to be false.  Some will have fallen victim to late or non-payment from those above them in the industry food chain.  Some may have purely been poorly managed.
Regardless of the precise cause, the loss for more than 4,000 construction firms will have a widespread and potentially devastating effect.
Those that started those failed companies will now see their life’s work, their hopes and ambitions lying in tatters among the mounting pile of unpaid bills on their doormat.
Those employed by failed companies – directly or otherwise – now face the very real prospect of short to medium term unemployment at a time when times are hard even for those in full-time, gainful employment.
And then, of course, there is the supply chain below those failed companies in the industry’s pecking order.  The specialist contractors, the subbies, the materials suppliers, the fuel suppliers, the plant hirers and the scaffolding firms.  All of them will likely take a hit.  The size of that hit might be sufficient to send them under too.
The collapse of Carilion back in 2018 still looms large in the memories of those that were involved in the industry at the time.  The company went down with liabilities of some £6.9 billion, impacting upon an estimated 30,000 smaller businesses.
None of the 4,165 companies that have been declared insolvent since the start of 2023 were on the same scale as Carilion.  But with so many firms failing within such a short space of time, the effects could be just as devastating, and just as far-reaching.
At the beginning of 2023, financial experts Red Flag Alert predicted that the UK construction sector could see 6,000 insolvencies during this year.  The industry saw more than 4,000 in just the first three months, and the economic factors that dragged them under show no signs of abating.
Wherever you sit in the UK construction supply chain, we can only hope you made sufficient repairs to your financial roof while the sun was still shining.  The deluge looks set to continue.