With the war in Ukraine dragging on, price inflation barely easing and shortages of materials and labour still adding to the burden, you might expect the UK construction sector to be in the doldrums or even in recession.
But our annual review of the Top 100’s latest financial results finds that the UK’s biggest building firms have increased revenues and almost doubled their profit margins.
However, while these figures are encouraging, there is a fly in the ointment: insolvencies within the construction sector are at their highest level for 14 years. These figures are historic, of course – the most recent company results are for the year to March 2023. But this year has seen that trend accelerate.
In February, contractors Tolent and Metnor went under; Henry Construction Projects followed in June and J Tomlinson in July. And last month Buckingham Group announced its intention to appoint administrators.
How can this be? Well one clue is that most insolvencies are not among the tier-one contractors, but further down the supply-chain, among subcontractors – many of whom are tied into fixed-price contracts and have been caught out by recent cost inflation. This is acknowledged by lawyer Paul Caton on page 17 who urges contractors to consider fluctuation clauses in their contracts.
Not all tier-two contractors are vulnerable, though. In the first of a series looking at small and mediumsized firms (page 40) we speak to Midlands contractor Danaher & Walsh which is running a tight ship and enjoying steady growth.