An analysis by AB Drylining on information provided by Companies House has shown that between 2019 and 2023, 43% of new construction companies failed
Out of 251,741 construction companies, 108,281 were either dissolved, put into liquidation, or administration.
Some areas are tougher than others
The data also showed that some areas of construction are tougher for construction companies than others.
According to the data, construction companies dealing with railways and underground railways are the most difficult to open, having a failure rate of 60.9%. Bridges and tunnels came a close second with a failure rate of 59.3%.
Other high failure rates include companies dealing with roads and motroways (56.7%), water projects (45.9%), and commercial buildings (45.7%).
Conversely, the most successful new construction companies tend to be construction holding companies, with a failure rate of 29.3%, followed by construction equipment rental or leasing companies (24.3%), other construction installation (38.4%), utility projects for electricity and telecommunications (39.2%), and other civil engineering projects (39.4%).
Construction companies face many challenges
In November 2023, Begbies Traynor flagged that 5,919 construction companies in the UK were close to failure.
They highlighted that the pandemic, the invasion of Ukraine, Brexit, and inflation are all causes that make life more difficult for new construction compaines.
Julie Palmer, partner at Begbies Traynor at the time, said: “Tens of thousands of British companies are now in financial dire straits now that the era of cheap money is firmly behind us.
“Businesses that had loaded up on debt at rock-bottom rates and were only able to cling on during the pandemic thanks to government support must now deal with a financial reality check as higher interest rates hit working capital for the foreseeable future.”
Alfie Burrows, director of AB Drylining, said: “Our research provides useful insights for entrepreneurs eyeing the construction industry, offering not just a forecast of potential success, but a clear picture of the competitive landscape within specific sectors so they can position themselves for long-term growth.”
Alfie continued: “The data highlights a sharp contrast in success rates, with companies specialising in large-scale infrastructure projects facing significantly higher failure rates compared to those focused on niche services, equipment rental, or operating as diversified holding companies. Large-scale projects like railways, bridges, and tunnels are inherently complex, requiring substantial capital investment, planning, and expert risk management. Delays, cost overruns, and unforeseen technical difficulties are common and can seriously impact a company’s financial stability, especially those that are less established in the market. Not to mention, securing consistent contracts in these specialised fields can be competitive, making it challenging for new businesses to gain a foothold and build a consistent pipeline of work.”
