Construction Crisis
The construction industry is feeling the heat as the nation’s top 20 builders’ merchants resort to drastic measures to recover unpaid bills from struggling customers. The strain in the supply chain has led to a staggering 400% increase in winding-up petitions filed against builders and civil engineering contractors.
Data compiled by accounting firm Mazars reveals a stark contrast: in 2022/23, leading builders’ merchants sought court intervention to wind up 185 construction firms, a significant leap from the 44 petitions filed the previous year.
The skyrocketing prices of numerous construction materials have pushed many firms to the brink, leaving them grappling with unpaid bills. With insolvency rates already climbing, suppliers and builders’ merchants are increasingly turning to the courts to recoup unpaid bills before they morph into irrecoverable debts.
The past year has seen a sharp surge in the prices of essential construction materials, including cement (up 25%), ready-mixed concrete (up 18%), and insulation materials (up 41%).
Mazars’ report indicates that the construction sector witnessed 4,135 businesses going insolvent in the year ending January 2023, a 49% increase from the 2,776 businesses that folded the previous year.
Trouble Ahead
Patrick Lannagan, a Partner at Mazars, voiced his concern: “Builders’ merchants are resorting to more assertive tactics to recover unpaid bills, which spells trouble for the construction sector.”
He added, “The ripple effects of rising interest rates are being felt across the real estate sector, and the construction industry is no exception. It’s grappling with a concerning level of inflation for raw materials.”
“This is a clear indication that the financial pressures on the construction industry are intensifying. Everything from raw materials, energy, and borrowing to labor costs is on the rise. Coupled with the chronic issue of late payments, the financial stress is reaching a critical level.”
