4,208 UK construction companies became insolvent last year, meaning the industry accounted for 17% of the total across all sectors in England and Wales.

Construction was considerably ahead of the second-placed sector, wholesale and retail trade, which saw 3,710 insolvencies (15%).

The latest figures mean that last year was the third consecutive year in which more than 4,000 construction companies have collapsed.

Following the end of pandemic-era insolvency protections in October 2021, 4,167 construction companies collapsed in 2022 – up from 2,580 the previous year - before rising further to 4,388 in 2023.

Despite the year-on-year drop from 2023 in the most recent figures, the sector faces many challenges, including soaring costs and project disruption.

As in several other industries, there have been warnings that government plans to increase employer’s National Insurance contributions and the national living wage would further increase costs and strain struggling businesses, especially small and mid-sized contractors.

The sector has also been hit recently by a drop in output, with Tim Cooper, president of the UK’s insolvency and restructuring trade body R3, attributing the decline to “a reduction in repair and maintenance work.”

Cooper continued: “Construction has suffered in recent years with disruptions to work and increased costs hitting margins and businesses, while the General Election and the Budget have affected work being commissioned and starting more recently.

“We’re now firmly into the winter months, and it remains to be seen how the weather will affect work on site and the sector’s output levels.”

Striking a more positive note, Evelyn Partners partner Mark Supperstone stated that he expects the recent flat output figures to increase soon, predicting that there may be “some green shoots in the sector which will benefit construction firms, likely in the latter part of Q1 2025”.