Latest news with #InsolvencyService
Yahoo
6 hours ago
- Business
- Yahoo
Leasing lays the foundation as UK construction sector feels the strain
The UK construction sector is facing a perfect financial storm. In March 2025, more construction firms collapsed than in any other month since July last year. A total of 377 construction businesses became insolvent, according to the Insolvency Service, up from 368 in February. The vast majority were specialist subcontractors, including 87 electrical and plumbing firms and 71 building completion and finishing contractors. These figures come against a broader trend of financial stress across the UK economy. Overall, there were 2,238 company insolvencies in England and Wales in May 2025, up 8% from April and 15% from the same month a year ago. The construction sector was the worst affected, accounting for 17% of all insolvencies over the past 12 months. While the sector remains vital to economic growth and housing targets, small and medium-sized enterprises (SMEs) are increasingly unable to weather the squeeze. Data from Bibby Financial Services' (BFS) Q1 SME Confidence Tracker paints a stark picture: 72% of construction SMEs cite rising material costs as a major drag on profitability. At the same time, nearly a third (29%) say they don't have sufficient cashflow to operate effectively, much higher than in other sectors such as transport (6%) or wholesale (12%). BFS Construction Finance Report (Under Embargo)Download The result? Mounting bad debt and tightening margins, pushing more SMEs toward insolvency. Despite the sector's growing pain, many small firms remain optimistic. According to BFS, 67% of construction SMEs expect sales to rise in the coming year, up from 57% a year ago. But this optimism is tempered by doubt: 60% of firms believe that the Government's Industrial Strategy, anchored by £100 billion in capital commitments and a pledge to build 1.5 million homes by 2030, will disproportionately benefit large main contractors. The concern is that while large firms may have the resources and leverage to bid on and manage major infrastructure and housing projects, smaller subcontractors and regional builders are being left on the sidelines. And without targeted support, the risk is that the Industrial Strategy could deepen the divide between large and small players, rather than level the playing field. Contractual complexity is a persistent barrier for smaller construction firms. BFS's research found that nearly half (48%) of SMEs find contracts difficult to understand, rising to 56% among the smallest firms (1–9 employees). Even more worryingly, 58% of the smallest firms feel they must accept terms as-is, for fear of losing business altogether. These firms often operate at the end of the payment chain, leaving them vulnerable to delayed payments, unfavourable terms, and bad debt, all of which exacerbate existing cashflow issues. Limited bargaining power and a lack of legal or administrative support to challenge complex contracts only deepen the financial risk. As costs and risks rise, construction SMEs are finding it increasingly difficult to secure external finance. BFS reports that 51% of firms say access to finance has worsened over the past six months, more than in any other sector. The most common reasons for seeking finance include investment in growth (39%) and covering day-to-day operations (32%), but for many, traditional routes to funding are drying up. This leaves a crucial gap, one that asset finance and leasing may be increasingly well placed to fill. Despite broader financial pressures, equipment and plant finance—a key construction indicator—shows resilience, according to figures from the Finance & Leasing Association (FLA). While plant and machinery finance fell 5% year-on-year in April 2025, it rose by 1% over the past three months, and remained up 1% over the full 12 months. These figures suggest that the April dip may reflect a seasonal slowdown or temporary pause, rather than a long-term contraction. For construction firms facing restricted access to traditional lending, leasing and asset finance offer a vital alternative, enabling investment in essential equipment without overstretching limited cash reserves. Asset finance new business fell by 7% in April 2025 The construction sector is far from short on potential. Confidence in future demand remains high, and Government infrastructure targets offer a substantial pipeline of opportunity. But without targeted action to improve access to finance, simplify contracts, and ensure SMEs benefit from public investment, the sector risks becoming increasingly dominated by a few large players—at the expense of thousands of smaller firms that make up its backbone. As BFS Group Managing Director Jonathan Andrew puts it: 'The Government's commitment to invest in the construction sector may well explain increasing optimism amongst business leaders, however it's critical that small firms are not left on the sidelines... Improving access to finance will be a critical lever to give SMEs the boost they need to invest, innovate and grow.' The future of UK construction depends not only on ambitious targets but on ensuring that the smallest firms can build, compete, and survive. While the UK construction sector faces rising insolvencies, bad debt, and a squeeze on working capital, equipment finance is proving to be a vital support system. Despite a short-term dip, recent FLA figures suggest continued resilience in plant and machinery finance—pointing to steady demand for flexible funding solutions. As traditional lending tightens, asset finance can help construction SMEs bridge funding gaps, manage risk, and seize growth opportunities aligned with the Government's infrastructure plans. For finance providers, the message is clear: supporting this sector isn't just about survival—it's about enabling recovery and long-term resilience. "Leasing lays the foundation as UK construction sector feels the strain" was originally created and published by Leasing Life, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site. 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Daily Mail
11 hours ago
- Business
- Daily Mail
Insolvencies jump as Rachel Reeves' labour costs hike hits businesses
Business insolvencies across England and Wales rose sharply last month as firms buckled under the pressure of higher labour costs associated with last year's Autumn Budget, official data suggests. Insolvencies jumped 8 per cent month-on-month to 2,238 in May, reflecting a 15 per cent increase on the same time last year, according to the Government's Insolvency Service. It follows hikes to employer national insurance contributions and the national living wage in the previous month, compounding the impact of lacklustre economic growth, high borrowing costs and fragile consumer confidence. Mark Ford, partner in the restructuring and recovery team at consultant S&W, said the 'challenging operating environment' had 'eroded cash reserves for businesses and left some in a perilous position'. He added: 'Businesses are now facing newer challenges that threaten their viability and this means we are likely to continue to see a steady stream of company insolvencies in the coming months.' Insolvency growth in May was driven by 1,734 creditors' voluntary liquidations, where company directors choose to shut a business down. The Insolvency Service recorded 354 compulsory liquidations, but this was down 7 per cent on April's 10-year high. Giuseppe Parla, restructuring and insolvency director at Menzies, identified construction, wholesale and retail trade, and hospitality as sectors that will continue to struggle against higher costs. He added: 'Whilst interest rates may come down further later in the year, stability for our economy seems to be what is required, but how easy will that be to achieve?' The Insolvency Service also recorded 136 company administrations, which are a recovery procedure often used by larger entities to ensure a better outcome for creditors. David Hudson, restructuring advisory partner at FRP, said the 'quiet, but steady' rise in administrations is 'particularly concerning'. He said: 'These usually involve the very largest businesses and so could prompt a significant knock-on impact in terms of jobs and supply chains if they continue to rise. 'It's also an early signal that financial distress is deepening – not just among smaller businesses, but at the top end of the market too.'
Bloomberg
12 hours ago
- Business
- Bloomberg
Insolvencies Jump to 11-Month High as UK's Tax Hikes Take Toll
The number of companies going bust in England and Wales rose to the highest in 11 months as firms struggled with the Labour government's tax hikes and a broader slowdown in the economy. Insolvencies rose to 2,238 in May, a 15% jump from a year earlier, the government's Insolvency Service said on Friday.
The Independent
13 hours ago
- Business
- The Independent
Personal insolvencies 5% higher in May than same month of 2024, figures show
The number of people going financially insolvent across England and Wales in May was 5% higher than the same month in 2024, according to Insolvency Service figures. In May 2025, 10,014 people entered insolvency, including bankruptcies, debt relief orders (DROs) and individual voluntary arrangements (IVAs), a total which was broadly unchanged compared with 10,060 insolvencies in April 2025. The Insolvency Service said DRO numbers have remained similar to the record high levels seen over the past 12 months, with 3,783 cases recorded in May. The report said: 'DRO numbers have been at record high monthly numbers since the abolition of the upfront £90 fee in April 2024, with the 45,802 DROs in the past 12 months being nearly twice as high as the long-term annual average.' In June 2024, DRO eligibility was expanded. The debt threshold was increased from £30,000 to £50,000 and the allowable value of an exempt motor vehicle was increased from £2,000 to £4,000. IVA numbers this year so far have remained in line with monthly averages seen last year. The report added: 'The 5,583 IVAs registered in May 2025 was similar to April 2025 and 13% higher than in May 2024.' With 648 cases recorded, bankruptcy numbers were 4% higher than in May 2024, but remained at less than half of pre-2020 levels. In addition to the formal insolvencies, there were 7,805 'breathing space' registrations recorded under the Debt Respite Scheme in May 2025 – 2% higher than in May 2024. Of the breathing space registrations, 7,684 were standard breathing space registrations and 121 were mental health breathing space registrations. The scheme gives people with problem debt a period of protection from their creditors, enabling them to access professional debt advice, without the stress caused by spiralling debt and looming enforcement action. A standard breathing space gives people with problem debt legal protections from creditor action for up to 60 days. A mental health crisis breathing space is available to those receiving mental health crisis treatment. It lasts as long as the person's mental health crisis treatment, plus 30 days. Households faced various bill increases in April, putting an additional strain on some people's finances. The number of company insolvencies in England and Wales was 2,238 in May 2025 – a 15% jump compared with May 2024. Monthly company insolvency numbers in the first five months of 2025 were slightly higher than in 2024 and at a similar level to 2023, which saw a 30-year high annual number of insolvencies, the Insolvency Service said. The company insolvency rate remains much lower than the peak of 113.1 per 10,000 companies seen during the 2008-09 financial downturn, the report said, adding: 'This is because the number of companies on the effective register has more than doubled over this period.'
Western Telegraph
7 days ago
- Business
- Western Telegraph
Pembrokeshire company director sentenced for fraud during Covid
Mr Zahid Afzal of Haverfordwest fraudulently claimed extra Covid bounce back loans for his phone sales and merchandise companies. When appearing at Swansea Crown Court on Thursday, June 12, Mr Afzal was sentenced for three counts of fraud by false representation and was handed a two-year suspended sentence, and 300 hours of unpaid work. Insolvency Service Chief Investigator David Snasdell said: 'It is clear from our investigations that Zahid Afzal felt he could continue to apply time and time again for loans he was not entitled to. 'Not satisfied with the substantial funds he had legitimately received, he went on to lie on applications and exaggerate his companies' turnovers. 'His sentencing should serve as a reminder to those contemplating fraudulently pocketing taxpayers' money to think again.' The director of Phone Bits Ltd and Phones Onn Ltd had already received Covid loans for both companies legitimately – totalling £52,500 – when he applied for three more. The 37-year-old, from Haverfordwest, falsely claimed the applications were the first he had made and exaggerated the turnover of each company. He then received three additional loans of £50,000 each – one for Phone Bits Ltd and two for Phones Onn Ltd – between May and November 2020. The Insolvency Service investigation did not find any wrongdoing with the use of his initial loans for Phones Onn Ltd (£20,000) and Phone Bits (£32,500), which he was entitled to and were used entirely for business purposes. But he moved most of the £150,000 he received from his second round of loans to personal accounts despite stating they were for business purposes. The Bounce Back loan scheme helped small and medium-sized businesses to borrow between £2,000 and £50,000, at a low interest rate, guaranteed by the Government. The loans were made on the condition that they were not to be used for personal purposes, but could be used, for example, to purchase a company asset such as a vehicle, if it would provide an economic benefit to the business. The money lent to a company had to be paid back, over six or 10 years, with payments starting 12 months after the company received the loan. The Insolvency Service is seeking to recover the fraudulently obtained funds under the Proceeds of Crime Act 2002.
