Number of business failures hits two-year low

Construction industry insolvencies dipped to a two-year low in April as the overall economy showed signs of recovery.

Only 13 firms hit the buffers last month, down from 29 in March, amid easing inflation.

This is the lowest level since May 2022, when 11 construction companies went under.

Two failed firms – Everest 2020 and Utilities Design & Planning – were large enough to file turnover and profit figures with Companies House.

£51.1m turnover Everest 2020 was by far the largest company to hit the brakes in April.

The Hertfordshire-based window and door installer appointed administrators from ReSolve on 24 April after two years of losses.

The company’s latest accounts showed a £1.2m pre-tax loss in the financial year ending 31 May 2022, down slightly from the £3.4m loss it posted the year before, which it partly attributed to the £1.2m cost of closing its factory in Sittingbourne, Kent.

It employed an average of 343 people, down from 362 in the prior year.

The other high-turnover company to go under was Utilities Design & Planning (UDP).

The Manchester contractor turned over £10.6m in its last full year of operation, split about half between its civils and traffic management arm.

It had recently carried out £375,000 worth of groundworks on Winvic’s Manchester Airport logistics development and £1.3m worth of enabling works for Lendlease on the £1bn St John’s scheme in Manchester, for which the main contractor was partnering with McLaren.

UDP posted a pre-tax loss of around £1.4m in both of its two final years of trading.

The firm had £118,000 in cash reserves at the end of 2022, and was boosting its working capital through loans and invoice discounting.

Other casualties from last month included Hampshire-based glazing specialist Aluminium Windows Ltd, which had an average of 50 employees in 2022.

Groundworks and concrete frame contractor Jesmor Construction Ltd also went under.

The firm’s last management accounts for the period ending 28 February 2024 showed a £1.2m turnover and pre-tax loss of £318,000.

A bust-up between former lovers spelt the end of County Durham irrigation specialist Full Circle Irrigation Ltd.

The administrators report revealed that the company was hit by legal costs adding up to £64,000 from two employment tribunals, both linked to the breakdown of the company director’s marriage to a former director.

The director also claimed that the former director had taken money out of the business account without permission, which hit the company’s working capital.

Gareth Harris, partner at RSM Restructuring Advisory, said that the drop in construction insolvencies reflected lower insolvency numbers throughout the wider economy.

“Construction is one of the larger contributors to the overall number [of insolvencies], so it’s no surprise they were slightly lower this month,” he said.

Harris said that insolvency numbers are closely tied to interest rates and inflation, resulting in fewer business failures as inflation recovers from recent highs.

“Interest rates are not coming down yet but they are predicted to,” he added. “People are beginning to feel more optimistic that there is a future and they can continue.”

He sounded a cautious note, however, saying: “Construction is definitely not out of the woods yet but there might be some areas of optimism.”