A record number of companies went under in November 2021 © Ezra Bailey via Getty Images
A record number of companies went under in November 2021 © Ezra Bailey via Getty Images

Hundreds of construction firms go bust due to 'immense costs'

19 January 2022

The number of construction firms going bust has increased by almost 80% as the sector is buffeted by supply difficulties. 

The monthly average number of construction firms filing for insolvency reached 291 in the three months to 30 November 2021, according to the latest UK government data. 

In November alone 325 companies went under, the highest number of builders to do so in any month throughout the pandemic. 

Rico Wojtulewicz, head of housing and planning policy at the National Federation of Builders, told Supply Management many construction firms were being forced to shut due to the “immense costs” seen throughout the construction industry, including rising raw material and labour costs. 

He said: “Material supply chain pressures have made projects unviable, created legal issues on fixed price contracts, delayed works and closed some businesses down for good. Costs and delays are not abating quickly enough.

“Supply chain difficulties, along with the higher price and unavailability of labour have created a perfect storm for industry and those who are already under pressure from the broken planning process are suffering the most, with many exiting the sector due to immense cost and risks associated with just being able to get on site.”

The figures were up 78% compared with the same period in 2020, when an average of 127 construction firms per month filed for insolvency.

Wojtulewicz continued: “We expect certain supply chain difficulties to ease this year. For example, timber has become somewhat easier to get hold of. 

“However, difficulties can quickly resurface with new Covid variants, as despite many products coming from the UK, raw materials, even for packaging, are broadly sourced worldwide. With inflation continuing to rise, we don’t see normality returning until 2023-24.”

Research by the Federation Of Master Builders (FMB) found 82% of builders were forced to delay jobs due to a lack of materials in 2021, and an additional 60% were forced to pause work due to a lack of skilled tradespeople. 

In total, it found 89% of builders faced delays due to either materials or skills shortages. 

Brian Berry, chief executive of the FMB, said: “This is stifling any return to normality for the industry following the pandemic, and will not help the country to ‘build back better’.”

Meanwhile the Construction Leadership Council (CLC) said despite seeing signs of improvement in some product availability in the construction sector, supply challenges continued to affect bricks and aircrete blocks, roof tiles, steel lintels, manhole covers, plastic drainage products and certain sealants, coatings and paints.

It said demand for roof tiles remained “high”, with lead times averaging 24 weeks, rising to 41 weeks in some cases. 

It said certain products are being hit by wider supply crises, including clay tiles, which are seeing price hikes due to rising energy costs.

While the issues previously affecting timber and cement availability have eased after timber prices rose 50% last year due to “unprecedented” demand, “they have not been fully resolved” the CLC said. It warned construction firms to expect longer lead times to return as the volume of demand increases. 

John Newcomb and Peter Caplehorn, co-chairs of the CLCl’s product availability working group, said in a joint statement: “We continue to stress the importance of maintaining open lines of communication throughout the supply chain and encourage all sectors to continue to work closely and collaboratively to manage challenges and plan future work.”

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