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The number of UK construction companies in ‘significant’ distress has risen 13.9% from Q2 2024, while the number in ‘critical’ distress has increased 15.8% to 6,999, according to Begbies Traynor.

The corporate recovery specialist has produced its quarterly Red Flag Alert reports on British corporate health for almost two decades.

In the second quarter of 2025 there were 102,285 UK construction companies in ‘significant’ distress, meaning that they are struggling to meet their financial obligations. This is 13.9% more than in Q2 2024.

The number of UK construction companies in ‘critical’ distress, a more severe category indicating potential insolvency, was 6,999 – an increase of 15.8% on a year before.

Sectors of the industry experiencing the largest increases in volume of ‘significant’ distress in the past year included:.

• Specialised design activities: up 24.0% to 6,652
• Plumbing, heat and air-conditioning installation: up 23.4% to 7,282
• Development of building projects: up 22.8% to 15,075.

There were decreases in significant distress in some categories too, including  ‘Construction of commercial buildings’ (down 2.6% to 3,573) and ‘Construction of other civil engineering projects’ (down 5.3% to 2,068).

Across the UK economy as a while, there are now 666,876 businesses in ‘significant’ financial distress (up 10.8% year-on-year and 15.2% up on Q1 2025) and 4 9,309 businesses in ‘critical’ financial distress (up 21.4% year-on-year and 8.6% higher than in the first quarter of 2025).

Begbies Traynor partner Julie Palmer said: “Financial distress has intensified over the past twelve months. This means businesses across the UK are facing significant headwinds and many will have to review where they can tighten their budgets or restructure to give themselves more stability in the immediate future.

“This time last year, there was a degree of optimism amongst business leaders who were hoping to see a shift in fortunes in the second half of the year, but fast-forward 12 months and confidence is in short supply.

“In the face of these headwinds, a large proportion of the 50,000 businesses currently in ‘critical’ financial distress need to urgently investigate their options if they are going to weather the storm. With no end in sight to the current economic malaise, I fear the financial burdens companies are enduring at present are simply too high for many not to avoid collapse.”

Red Flag Alert chief executive Richard West said: “The construction sector continues to face sustained pressure, with insolvencies remaining at elevated levels due to rising material costs and labour shortages, but also from delayed payments in a fragmented market. However, this isn’t just about the cost of materials or slow cash flow, there’s an array of difficult challenges globally that are having a knock-on effect. Construction is under a lot of pressure right now, particularly for domestic and commercial building companies, with their low margins and escalating expenses.

 “In these challenging times, full transparency is a proven way to mitigate risk, and senior leaders need to collate information to pre-emptively act at the first sign of distress. Warning signs need to be closely monitored. A few years ago, no one would bat an eyelid at a missed invoice or declining credit score but these days it can be a distinct sign of difficult challenges to come. This certainly highlights the importance of real-time insight to help businesses make informed, proactive decisions.”

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