Construction

Our construction sector experience

If you run a construction business and cash is tight, contracts are squeezing your margins, or creditors are starting to press, you are far from alone, however, the position is rarely as hopeless as it can feel.

The directors we speak to are often dealing with money tied up in retentions, a fixed-price contract that no longer stacks up, or a client further up the chain who hasn’t paid.

There are options at every stage, from informal turnaround through to an orderly closure, but in construction the right route depends on what’s happening with your live contracts, your bonds and your supply chain. The earlier you take advice from a licensed insolvency practitioner, the more of those options remain open.

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Why is the construction sector under so much financial pressure?

Construction has been the UK’s single biggest sector for company insolvencies for four years running. In the 12 months to March 2026 around 3,827 construction firms entered into formal insolvency proceedings, which equates to roughly one in six of all company failures, with specialist subcontractors consistently the hardest hit.

The reasons for this are numerous, with many being specific to how the construction industry operates rather than just the general cash flow issues many companies are facing.

Challenges we typically see within this sector include:

• Fixed-price contracts being agreed before recent cost rises and leaving firms delivering work at a loss
• Material, energy and labour costs remaining elevated
• Payment terms are long and retentions tie up cash for months or years
• The domino effect when one firm in a chain fails and the shock passes straight down to its subcontractors

Add planning delays and softer housing demand and even well-run firms can be pushed into financial difficulty through no fault of their own.

Why construction insolvency is more complex than most

Most general advice on closing or rescuing a company assumes a simple business: a few creditors, some stock, and a lease. Construction is rarely that simple.

You’re likely dealing with part-finished contracts, retentions held by clients, performance bonds and collateral warranties, plant that may be hired or financed rather than owned, CIS tax obligations, and a chain of subcontractors who are also your creditors.

Each of these factors changes what your best option is and the order in which steps need to be taken. The sections below cover the parts that are specific to construction.

The payment chain, retentions and the domino effect

Cash flow in construction is uniquely exposed because money moves slowly down a chain. Common pressure points:

• Retentions: A percentage of each payment (often around 5%, reducing on completion) is held back by the client, sometimes for a year or more after practical completion. This means significant sums of money can be locked up exactly when you need cash.
• Late and disputed payments: The Construction Act (the Housing Grants, Construction and Regeneration Act 1996) sets out payment and adjudication rules and outlaws “pay-when-paid” clauses, but disputes and slow payment remain endemic throughout the industry.
• The domino effect: If a main contractor or developer above you fails, you may be left unpaid for completed work while still owing your own subcontractors and suppliers. In the construction industry, a single failure can easily take several firms down with it.

Advice on rescue options

 

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Professional insolvency advice for the construction sector

It is imperative to obtain early insolvency advice if your construction company is experiencing financial distress, to avert a crisis situation. Dealing with severe creditor pressure at a time when the moratorium on legal action is ending, could leave companies on a precipice in terms of liquidation.

Swift and decisive action is needed in this scenario, as once a creditor has petitioned to wind up your company, the time available for action is extremely limited. The UK operates a robust regime to help businesses in financial distress, and the sooner you seek advice from an insolvency professional, the greater the likelihood of company rescue.

So what procedures might be available if formal action is required?

Rescue my construction business

Company administration

Company administration offers your business a safe haven from creditor legal action. For eight weeks from entering administration, a moratorium remains in place, providing the administrator with time and space to formulate a plan.

This might include cost-cutting, for example, to relieve the pressure on working capital and emerge as a more streamlined company, or restructuring debts within a legally binding arrangement.

Company Voluntary Arrangement (CVA)

If your business is assessed as viable for the long-term by a licensed insolvency practitioner, a Company Voluntary Arrangement can reset its financial capability and enable it to trade out of difficulty.

A repayment proposal is presented to creditors, and if 75% (by value of debt) vote in favour, the CVA comes into force, typically lasting between three and five years. A significant benefit of this process is that directors regain full control once the arrangement is in place.

Sell my construction company

A business sale may be possible even if your company is experiencing severe financial decline. Pre pack administration is a procedure that quickly enables the underlying assets of a business to be sold, with staff contracts being transferred safely under TUPE regulations.

Selling your business via pre pack administration may be an option if a creditor is threatening a winding up petition. The process is typically appropriate for larger companies, and is fully regulated.

Liquidation advice for the construction sector

If it is not possible to rescue your business, it is important to act swiftly and place it into voluntary insolvent liquidation. Creditors Voluntary Liquidation, or CVL, protects creditor interests as is required by insolvency law, but also helps directors to avoid accusations of wrongful trading.

The appointed liquidator sells all business assets, and the funds generated from sale are used to repay creditors. The company name is then struck from the register at Companies House, and the business ceases to exist.

Compulsory liquidation is the other form of insolvent liquidation, but choosing to take this route introduces considerable risk. It could leave you facing disqualification for up to 15 years, and personal liability for any increased creditor losses due to the delay in ceasing trade.

When you enter Creditors’ Voluntary Liquidation, you may also be eligible for redundancy pay and other statutory entitlements, such as holiday pay and wage arrears. We can put you in touch with a trustworthy and highly experienced claims management firm to establish your entitlement and help you make a claim.

Those firms that act quickly and seek professional advice at an early stage of decline, or before cash flow problems increase to the stage of distress, can protect themselves from the worst outcomes.

Awareness of cash flow needs, streamlining practices, and other protective measures, can save businesses from liquidation. Our team of experts at BTG Begbies Traynor are here to provide that support, and help you deal with the unparalleled economic and trading circumstances currently being experienced by the construction sector.