Construction distress is rising again: what suppliers need to know

More than 108,000 UK construction businesses are now in significant financial distress. That's 6,772 more than three months ago, and nearly 5,000 more than a year ago.

If you supply materials, plant or labour to the trade, some of those businesses are probably on your sales ledger. Here's what the latest figures show, what's driving them, and how to spot trouble before it becomes your bad debt.

The numbers

Business recovery firm BTG published its quarterly Red Flag Alert on 27 October. It scores every active UK company on its accounts and payment behaviour. A company lands in "significant distress" when signs like shrinking working capital, falling net worth or mounting liabilities build up.

108,340 construction firms were in significant distress at the end of September.
That's up 6.7% in three months, and 4.6% on a year ago.
Construction ranks second of 22 sectors, behind only support services.
Across the whole economy, a record 738,144 businesses are in significant distress.

These are warning scores, not failures. Most firms on the list will pull through. But they're the pool that future insolvencies come from.

The official figures confirm the pattern. In the year to September, 3,873 construction companies in England and Wales became insolvent, according to the Insolvency Service. That's 17% of every insolvency where the industry is known, more than any other sector. And construction insolvencies are falling more slowly than any other large sector.

What's driving it

Work is still shrinking. The S&P Global construction index stood at 46.1 in September. Anything below 50 means the industry is contracting. Housebuilding is weakest of all, at 40.7, held back by the cost of borrowing.

Behind that sit four pressures that come up again and again:

Costs that won't come down: energy, wages and other employment costs, and materials, often on contracts priced months earlier.
Clients delaying decisions: fewer new orders means firms burn cash while they wait for the next job.
Cash stuck on sites: retentions, slow payment and disputes leave firms short even when the order book looks full.
Tax arrears: BTG says UK businesses owe HMRC £27.3 billion, and HMRC is often the first creditor to go to court.

The collapses behind the figures

Several well-known names have gone into administration in the past year:

Merit, the Northumberland offsite specialist, entered administration in November 2025 with the loss of around 340 jobs. HMRC had already petitioned to wind it up.
Zentia, the ceiling manufacturer, went into administration in June 2026. Around 170 jobs went and production stopped at two sites.
Torsion Construction in Leeds, with turnover of £165 million and about 150 staff, went into administration at the end of July 2026. Another creditor had issued a winding-up petition against it in February, five months earlier.

Look at that last one again. The warning was public five months before the end. A supplier who spotted it in February had time to tighten terms, chase what was owed and stop adding to the debt.

The warning signs to watch

Construction firms rarely fail overnight. The signs usually show up in public first:

A winding-up petition. Another creditor has gone to court. This is the clearest warning there is.
Accounts filed late. Companies have nine months after their year end. Late filing often means bad news in the numbers, or an accountant who hasn't been paid.
Losses or falling turnover in the accounts that are filed.
New secured borrowing, registered as a charge against the company's assets.
Directors leaving, especially several at once.
A notice of intention to appoint administrators, which gives the company a short breathing space from its creditors.

Closer to home, watch for payments that start arriving later, smaller part-payments, and new excuses. On their own they prove nothing. Alongside the public signs, they're worth a phone call.

What to do if a customer shows the signs

Stop adding to the debt. Move to payment up front or on delivery until things are clear.
Chase what's owed now, politely but firmly, and keep a record.
Check your terms. A retention of title clause may let you recover goods that haven't been paid for.
Take advice early if a petition has been filed. Payments made after a petition can sometimes be reclaimed if the company is later wound up.

Help is coming on late payment

The Commercial Payments Bill, introduced in May, would cap payment terms at 60 days for most businesses, add interest at 8% above base rate to late payments as standard, and ban cash retentions in construction after a two-year transition. It's still going through Parliament, so it won't help with this winter's cash flow.

Know before they stop paying you

You can't check every customer every week. CreditorTrack UK does it for you. Add the businesses that owe you money and we'll tell you the moment one shows a warning sign, including court petitions, often weeks before the company's record changes. Your first customer is free.

Construction distress is rising again: what suppliers need to know

The numbers

What's driving it

The collapses behind the figures

The warning signs to watch

What to do if a customer shows the signs

Help is coming on late payment

Know before they stop paying you

Sources

Is one of your customers at risk?

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