What's Happening?
The construction sector in England and Wales remains significantly impacted by insolvencies, accounting for 17% of all company insolvencies over the past year. Despite a 13% decrease in construction insolvencies in August
compared to the previous year, the sector continues to struggle with high inflation, interest rate uncertainty, and fragmented supply chains. These factors contribute to overtrading and underresourcing, as firms maintain larger workforces and absorb additional costs in anticipation of future projects. The Insolvency Service recorded 23,141 insolvencies in the year to August 2025, with 3,934 in construction. The sector's challenges are compounded by cashflow pressures, delayed payments, and planning delays, leading many businesses to engage with restructuring services.
Why It's Important?
The construction sector plays a critical role in driving regional growth and supporting thousands of jobs. However, the ongoing economic pressures threaten its stability and ability to contribute effectively to the economy. The sector's insolvency rates remain elevated compared to pre-pandemic levels, indicating a fragile environment. With new orders declining for nine consecutive months and employment shrinking, the sector faces significant challenges. The upcoming Autumn Budget presents an opportunity for the government to address these issues through potential tax changes and reduced reliefs, which could further strain construction businesses. Supporting the sector through meaningful business rates reform and targeted support could encourage innovation, sustainability, and skills development.
What's Next?
The proposed changes to the government's Planning and Infrastructure Bill could facilitate faster planning decisions and a clearer route to delivery, potentially unlocking a boom in housebuilding. The Autumn Budget, scheduled for November 26, is anticipated to address concerns within the construction industry, including potential tax changes and reduced reliefs. Industry leaders are advocating for reforms that recognize the specific challenges faced by construction firms and support their growth and investment. The government's decisions in the upcoming budget could significantly impact the sector's ability to stabilize and thrive amid ongoing economic pressures.
Beyond the Headlines
The construction sector's challenges highlight broader economic issues, such as the impact of high inflation and interest rate uncertainty on business operations. The sector's reliance on government policy and planning decisions underscores the importance of effective governance in facilitating industry growth. The potential reforms in the Planning and Infrastructure Bill could set a precedent for more efficient planning processes, benefiting not only construction but other sectors reliant on timely project approvals.
