Nearly 8,000 construction companies in ‘critical financial distress’: report

Begbies Traynor’s latest Red Flag Alert report spells bad news for the construction industry, with the number of companies in critical financial distress growing by 32.6%.

The accounting firm’s report comes on the heels of the administration of Stewart Milne Group and Stewart Milne Homes North West England after the company was unable to find a suitable buyer. Last year, North Wales firm Brenig Construction also went under with £5.4m in debts, as did Lane End Developments Construction with a debt figure of £13m. Buckingham Group Contracting went bust in September.

As of the fourth quarter of 2023, Begbies Traynor put 7,849 construction companies down as being in critical financial distress, with another 83,332 in significant financial distress. Begbies Traynor noted that historically companies who have been on the critical financial distress list often go insolvent before the end of the year.

For the real estate and property services industry, the figures are 6,228 companies in critical financial distress and 62,176 in significant distress.

Construction and real estate were not alone in facing financial troubles – Begbies Traynor reported that the overall figures of companies in critical financial distress had grown by nearly 26% from the previous quarter – with 47,000 companies near collapse nationwide.

“After a difficult year for British businesses that was characterised by high interest rates, rampant inflation, weak consumer confidence, and rising and unpredictable input costs, we are now seeing this perfect storm impacting every corner of the economy,” said Julie Palmer, partner at Begbies Traynor.

“Now that the era of cheap money is firmly a thing of the past, hundreds of thousands of businesses in the UK, who loaded up on affordable debt during those halcyon days, are now coming to terms with the added burden this will have on their finances,” she continued.

Ric Traynor, executive chairman of Begbies Traynor, did issue some silver lining.

“Later this year, we could see some respite for companies as inflation looks like it may reach more palatable levels, which in turn should result in interest rates starting to climb down from current heightened levels,” he said.

“Unfortunately, there are no signs of an easy fix and, with geo-political uncertainty continuing to rise and a hike in the national wage around the corner, the backdrop is hardly improving for an economy that is still firmly in recover mode post-pandemic.”