Legal experts warn that insolvencies in construction could hit record highs this year after 308 construction companies entered insolvency in February 2023
The latest statistics show there were 2,457 company insolvencies in March 2023 – a 16% rise on the same month in 2022.
In Q1, there were 5,747 company insolvencies, 18% higher than in Q1 2022. In Q1, there was an 18% increase in insolvencies in construction, which was the hardest-hit sector.
Insolvencies in construction face record levels after being hit by supply chain issues and cost increases
Lauren Hartigan-Pritchard, Head of Restructuring & Insolvency at award-winning law firm Higgs LLP, stated: “Company insolvencies are at record levels across the board, and unfortunately construction is leading the way.
“The circumstances for the rise in insolvencies varies sector-by-sector. The construction industry has been hit hard by increases in the cost of energy and materials, compounded by unpaid bills and supply chain issues.
“Each sector has its own challenges. We are witnessing a perfect storm of events that is making life very difficult for many businesses right across the country.
“Unless the economic picture improves, high levels of business failures are guaranteed.”
Abuse of the government Covid-19 Bounce Back Loan Scheme accounted for 50% of disqualifications
During the financial year 2022/23 932 directors were disqualified – a 16% increase on 2021/22.
It is estimated that around 50% of these disqualifications included an allegation relating to abuse of the government’s Covid-19 Bounce Back Loan Scheme.
Suky Mann, principal associate in Higgs’ Restructuring and Insolvency team, commented: “With Government figures suggesting that Bounce Back fraud has resulted in an estimated £3.5bn in losses, we suspect this is the mere tip of the iceberg in a raft of disqualifications to come in the next 12 months.
“It’s not just directors of insolvent companies that have felt the full force of the Insolvency Service.
“In December 2021 the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 gave the Insolvency Service new powers to disqualify directors of dissolved companies.”
