The latest ‘Red Flag Alert’ report from Begbies Traynor has found 102,285 construction companies are in ‘significant’ distress, rising 13.9% from Q2 2024
Measured year-on-year, the report also found that the number of construction companies described as in ‘critical’ distress has risen to 6,999, a rise of 15.8%.
Companies delivering ‘Specialised design activities’ (24.0%, Q2 2025 – 6,652), ‘Plumbing, heat and air-conditioning installation’ (23.4%, Q2 2025 – 7,282) and ‘Development of building projects’ (22.8%, Q2 2025 – 15,075) all experienced large increases in volume of ‘significant’ distress in the past year.
However, there were decreases in the number for those involved in ‘Construction of commercial buildings’ (-2.6%, Q2 2025 – 3,573) and ‘Construction of other civil engineering projects’ (-5.3%, Q2 2025 – 2,068).
Michael Ward, head of property at MAF Finance Group, part of Begbies Traynor Group, said: “Whilst there is distress in the construction sector at the moment there is also promise. The small businesses of the industry are filled with talented people that can supply the large firms at the top of the tree. And with planning applications continuing to go through for large domestic and commercial developers we would hope to see the trickle-down effect start to happen.
“Seeing that infrastructure and commercial builders are reducing in distress reflects the thought that public sector work and the return to office is starting to produce workstreams and revenue. Plumbers, electricians and finishers of projects, have experienced a large jump in significant distress and they need to buy time until the work reaches them. The sector as a whole is expressing a little more caution in the face of the heightened level of uncertainty both at a global and domestic level.”
Few are safe from the financial situation
Last September, the construction sector was rocked as ISG group, the sixth largest construction firm in the UK, fell into administration. 2,200 workers were immediately made redundant, and £1.15bn of public sector contracts were thrown in the air.
At the time, Glenigan economic director Allen Wilen said: “ISG’s demise is set to dampen overall industry workload in the near term as clients look for contractors to complete projects currently on site and as recently awarded projects are re-tendered. Its subcontractors and suppliers will be under increased financial pressure and contractors’ nationwide will need to review and work with their own supply chains to minimise financial stress and avoid any additional loss of industry capacity.”
The following months have continued to be economically rough for the industry, and PBC Today has been keeping track of several major collapses of construction companies throughout 2025.
Richard West, CEO of Red Flag Alert, said: “The construction sector continues to face sustained pressure, with insolvencies remaining at elevated levels due to rising material costs and labour shortages, but also from delayed payments in a fragmented market. However, this isn’t just about the cost of materials or slow cash flow, there’s an array of difficult challenges globally that are having a knock-on effect. Construction is under a lot of pressure right now, particularly for domestic and commercial building companies, with their low margins and escalating expenses.
“In these challenging times, full transparency is a proven way to mitigate risk, and senior leaders need to collate information to pre-emptively act at the first sign of distress. Warning signs need to be closely monitored. A few years ago, no one would bat an eyelid at a missed invoice or declining credit score, but these days it can be a distinct sign of difficult challenges to come. This certainly highlights the importance of real-time insight to help businesses make informed, proactive decisions.”
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