Analysis from Witan Solicitors, using data from Companies House, has highlighted the continued difficulties facing construction businesses
The data shows that, from January 2021 to December 2025, 41.6% of construction businesses have failed.
These businesses have either gone into administration, liquidation, or dissolved.
Business mortality rates affect different sectors
Of the 257,087 businesses that opened in this period, this means 107,086 closed sometime afterwards. But not all sectors are affected equally.
Companies involved in constructing bridges or tunnels, for example, saw a whopping 70.5% closure rate, the highest by far. This is followed by road and motorway companies at 59.5%, then railway and underground railway at 51.9%.
Commercial building construction fares somewhat better at 46.4% and domestic building construction is similar at 43.4%
The companies least likely to close are those involved in construction holding, at 25.7%, whole rental/leasing companies involved in construction equipment and civil engineering machinery are at a relatively safe 32.6%.
“Very few signs that things will ease in the short term”
Qarrar Somji, solicitor-advocate and director at Witan Solicitors, said: “The construction industry is under sustained and growing pressure, and there are very few signs that things will ease in the short term. In the past few years, we’ve even seen the collapse of well-known contractors such as ISG. So understandably, things may feel pretty bleak for firms that have just entered the market.
“But these challenges aren’t confined to one corner of the industry. Whether you’re looking at major infrastructure projects like roads, railways, bridges and tunnels, or at commercial and residential buildings, the same underlying problems keep resurfacing. Rising costs, stretched supply chains, skills shortages and increasingly complex regulation are crippling the industry.
“Cash flow remains one of the most critical pressure points, especially for smaller firms. In many cases, contractors are waiting 90 days or more to be paid. During that time, payments can be reduced or delayed through ‘pay-less’ notices, and disputes can drag on for months. This means that firms are effectively financing projects themselves while labour, materials and overheads continue to increase.
“This payment model is fundamentally flawed. While stronger regulation is clearly needed to protect the health of the supply chain in the long term, businesses can’t afford to wait for systemic reform. In the short term, firms need to be far more assertive about contractual payment terms and much quicker to put protections in place when early warning signs of financial distress appear.
“The Autumn Budget adds another layer of strain. From April 2026, the legal minimum wage for workers aged 21 and over will rise by 4%, from £12.21 to £12.71 per hour. Over the coming months, many firms will be forced to make difficult decisions about recruitment, pay, and whether projects remain commercially viable at all. Repricing work is becoming unavoidable, but that comes with its own risks in a highly competitive market. We’re likely to see more companies pushed towards restructuring or, in some cases, outright collapse.”
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