Huge jump in London construction firms closing as project delays and inflation bite
The number of London construction firms going bust has risen by almost a quarter since the pandemic, as the capital’s builders find themselves on the “sharp end” of nationwide delays to major infrastructure projects and soaring inflation.
A total of 884 of London’s construction businesses have gone bust already this year, up from 710 in the same period of 2019, according to Creditsafe data shared with City PM
It comes amid a wider slowdown in the sector, which has struggled against a backdrop of rising raw material costs, a dip in housebuilding and a string of long-delayed major infrastructure projects.
But experts say London faces greater exposure to national trends, due to the nature of the construction businesses which operate in the capital.
Rico Wojtulewicz, head of housing and planning policy at the National Federation of Builders, told City PM the City is “more exposed as many projects are investor led, where sub-contractors operate on a job-by-job basis rather than knowing there is a pipeline of work or relationship guarantee.”
As the cost of labour, material and energy rockets up and the viability of developments are questioned, subcontractors may find themselves on the “sharp end of decisions to delay or axe projects,” Wojtulewicz explained.
As cashflow is “reduced to nothing” and late payments increase, they are ultimately left with “no option but to cease trading,” he added.
The economic climate for construction businesses across the country is such that insolvency rates in the UK are at their highest level in a decade.
Creditsafe data shows 3,394 firms went bust in the UK in 2023, up 8 per cent year-on-year and by nearly a third since prior to the pandemic.
In late August, Buckingham Group – a major company involved in the HS2 project and works at Liverpool Football Club’s stadium, Anfield – ceased trading amid “rapidly escalating losses.”
Government delays to a number of major infrastructure developments, including HS2’s Euston terminus, have left many contractors in the lurch. The floundering Euston project, which was paused indefinitely in March, witnessed 30 to 40 per cent swings in raw material costs, according to a Public Accounts Committee report earlier this year.