State & Local Analysis
UK Construction Sector Faces Financial Pressures
March 18, 2026
Construction insolvencies in the UK (England, Wales, Scotland) have slightly decreased in early 2026 compared to recent years but remain above pre-pandemic levels, particularly impacting specialized construction activities. Profit warnings among FTSE-listed UK construction and materials firms tripled in 2025, driven by weaker market confidence, contract delays, labor shortages, rising employment costs, supply chain disruptions, inflation, and regulatory complexity. These factors continue to create financial stress and restructuring risks across the sector, with ongoing geopolitical uncertainties potentially exacerbating input costs and project viability.
- Procurement professionals should prioritize robust financial due diligence and risk management when engaging with construction contractors, emphasizing transparent communication and fair risk allocation.
- Contractors and suppliers need to prepare for continued market volatility and potential restructuring pressures, which may affect contract performance and delivery timelines.
- Government agencies and industry stakeholders should consider the impact of inflation and supply chain challenges on project budgeting and scheduling, incorporating appropriate indices and benchmarking tools.
- This environment underscores the importance of monitoring sector financial health to mitigate risks in public infrastructure and construction procurement planning.
Construction insolvencies appear to be easing from the peaks seen in recent years. January 2026 saw the lowest number of construction insolvencies of any January in the past three years of available data, continuing a downward trajectory across annual data between 2023 and 2025. However, recent volatility means there is no room for complacency. Construction insolvencies remain above pre-pandemic levels, with spikes in 2022 and 2023 partly driven by supply chain disruption and inflationary pressures linked to Russiaβs invasion of Ukraine. Current geopolitical uncertainty also poses risks to input costs, project viability and new starts, with the potential to push insolvencies higher again if instability persists. In this environment, transparent communication between clients and contractors, fair risk allocation and robust financial due diligence, including effective benchmarking and the use of appropriate indices to monitor underlying inflation, are more critical than ever.
— Karl Horton, Data Services Director at BCIS
In 2025, profit warnings issued by FTSE Construction and Materials firms in the UK were more than triple the number issued in 2024. Over half of these cited weaker confidence, delays in contract starts or slippage in project timelines. Labour shortages, legacy liabilities, rising employment costs and increasing regulatory complexity were also highlighted as sources of disruption and pressure in the report. In 2026 stress is still broad-based. Many retailers are weighed down by rising costs, weak sentiment and increasing investment needs. Meanwhile, sectors such as chemicals and construction continue to struggle with high input costs, regulatory pressures and fragile demand. Healthcare providers report intensifying cost and spending pressures. As a result, confidence remains fragile and risks continue to evolve, and we expect restructuring pressures to continue to build in the year ahead.
— EY-Parthenon analysis summary
Agencies
The Insolvency Service, Office for National Statistics, EY-Parthenon
Locations
Sources
- Construction insolvencies and profit warnings | BCIS · BCIS · Mar 18