Latest figures from Begbies Traynor鈥檚 Red Flag Alert, which monitors the financial health of UK companies, show that the number of construction companies in 鈥榗ritical鈥� distress in the third quarter of 2025 reached 7,361. This is 70.2% higher than in the same period last year.
The number of construction firms experiencing 鈥榮ignificant鈥� distress 鈥� a lower grade of woe 鈥� was up 14.6% year-on-year to 103,551 in the third quarter (July-September) but only up by 1.2% on the second quarter鈥檚 figure.
Areas of the industry hit hardest by 鈥榮ignificant鈥� distress in the past year were companies delivering:
- Specialised design activities 鈥� up 23.5% to 6,799
- Development of building projects 鈥� up 23.2% to 15,258
- Plumbing, heat and air-conditioning installation 鈥� up 17% to 6,971
- Electrical installation 鈥� up 16.1% to 7,247
- Construction of domestic buildings 鈥� up 9.9% to 11,742.
However, despite an annual rise, the third quarter was less bad than the second quarter of this year for many sectors. The number of companies experiencing 鈥榮ignificant鈥� distress was down roughly 4%, quarter-on-quarter, for business in 聽plumbing, electrical installation and domestic buildings.
Across all industries of the UK, 726,594 businesses reported 鈥榮ignificant鈥� financial distress during Q3 2025, a 15% annual increase, while businesses in 鈥榗ritical鈥� financial distress surged 78% year-on-year, with 55,530 companies affected.
Begbies Traynor managing partner Julie Palmer said: 鈥淎s the number of businesses in 鈥榗ritical鈥� distress continues to soar and unemployment figures look to be on the rise, boardrooms across the UK need this next budget to release pressure and uncertainty from their financial outlook. The construction industry is no exception, with tricky economic climate, rising costs, skills gaps and soaring demand continuing to put pressure on businesses of all sizes. Whilst there are some larger players continuing to grow, many in the SME space are close to the wire and will have to seek restructure, refinance or an exit.
鈥淭he other side of government action affecting business is its drive to recover unpaid taxes. It seems to have taken the view that for too long HMRC has been the lender of choice for some, and whilst its strategy of chasing unpaid business taxes will see it recover debt, it may also put down many businesses with excess debt in the process.
鈥淚n this climate there will be restructuring, just as much as there will be opportunities for larger companies to give the ideas and assets of businesses that perish a second chance through acquisition and rescue. The next month is crucial for the UK economy and construction industry. To carry out work, deliver jobs, ideas, productivity and growth there needs to be a healthy balance of small, medium and large companies. Businesses across the economy need to see confidence improve 鈥� this budget is crucial.鈥�
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