The construction industry witnessed a resurgence in company failures last month, reversing a brief decline in insolvencies.
- Twenty-three construction firms entered administration in May, adding to the total count of 115 for the year.
- Osborne’s subsidiaries were among the most notable companies to collapse, highlighting the sector’s ongoing instability.
- Increasing project losses, inflation, and economic pressures were cited as major factors in recent company failures.
- Experts express cautious optimism, suggesting improved economic conditions may offer some relief to the industry.
In May, the construction industry saw an uptick in business failures, with 23 firms entering administration. This increase brought the total number of insolvencies this year to 115, a figure lower than last year’s 154 by the same time, indicating some residual resilience in the sector despite current challenges.
Significantly, two major subsidiaries of Osborne – namely Osborne Construction Ltd and Osborne Homes Ltd – filed for administration. This followed the parent company, Geoffrey Osborne Ltd, entering administration at the end of April. The restructuring efforts that began in 2017 failed to stave off financial difficulties, as illustrated by a drastic drop in turnover from £155m to £44.5m within a year, alongside substantial project losses.
Additionally, Halsall Construction Ltd succumbed to financial pressures, citing inflation, Covid-19, and geopolitical tensions like the war in Ukraine as contributing factors to its loss-making projects. The firm reported a £2.3m loss on a turnover of £28.9m, resulting in its collapse while in the midst of several innovative projects.
In a similarly turbulent environment, New View Windows Systems, a company known for its growth in the glazing sector, also faced insolvency. Despite reporting an increase in turnover to £12.4m and a slight rise in pre-tax profits, the company was unable to overcome the market’s competitive challenges, leading to its demise.
Some industry voices offer a glimmer of hope amidst these adversities. Brendan Sharkey, a partner at consultancy MHA, notes a shift towards profitability for surviving firms, attributing this to reduced inflation and potential increases in client spending. Meanwhile, Chris Smith from Aldermore Bank highlights a ‘sense of optimism’ with an improving economic outlook and anticipates further improvements alongside potential interest rate reductions.
Furthermore, Steve Cox from Miller notes an amelioration within the contractor insurance market, leading to better conditions for companies that have weathered recent storms. However, he warns that ongoing contractor failures still pose risks to the broader supply chain, particularly in cases where project insurance ceases upon a contractor’s liquidation.
Overall, while recent data reveals persistent challenges, emerging optimism suggests a potential turnaround for the construction sector.
