UK construction insolvencies: the decade trend and what it means for CIS subcontractors

Construction insolvencies have risen 50% in a decade

In 2016, 2,793 construction companies were registered as insolvent across England, Wales and Scotland. In 2025, the figure was 4,188. That is a rise of 49.9% over nine years, based on record-level data published by the Insolvency Service under the Open Government Licence.^[1] Over the same period, construction became the sector with the highest raw count of annual company insolvencies in the UK economy.

For CIS subcontractors and trade businesses, this matters in a direct and practical way. Construction insolvencies are not an abstract economic statistic. They are the mechanism by which unpaid invoices become unrecoverable debts, retained money disappears, and cash that was owed to subbies on site never arrives.

The trend is tracked in real time in our UK Construction Insolvency Index, which publishes the full monthly and annual series for 2016 to the present. This article explains what the numbers mean, what each procedure type means for an unpaid subcontractor, and what trade businesses can do to reduce their exposure.

What the data shows: the key figures

The Insolvency Service data covers SIC Section F (construction), which includes construction of buildings (Division 41), civil engineering (Division 42), and specialised construction activities (Division 43). The figures are gross registered insolvencies counted at the date of registration.^[1]

Year	Total insolvencies	of which CVL	CVL share
2016	2,793	1,760	63.0%
2017	2,858	1,845	64.5%
2018	3,267	2,050	62.7%
2019	3,513	2,251	64.1%
2020	2,262	1,603	70.9%
2021	2,789	2,440	87.5%
2022	4,389	3,542	80.7%
2023	4,616	3,620	78.4%
2024	4,282	3,186	74.4%
2025	4,188	3,119	74.5%

Several points stand out in the series.

• The 2020 dip was artificial. Total insolvencies fell to 2,262 in 2020. This reflects the moratorium on winding-up petitions introduced during the Covid-19 pandemic, which suspended court-ordered liquidations. Compulsory liquidations fell from 824 in 2019 to 372 in 2020, with just 154 the following year. The underlying financial distress was not resolved; it was deferred. The 2022 and 2023 figures reflect that deferred distress materialising.^[1]
• 2023 was the decade peak. The index reached its highest annual total in 2023 at 4,616. The peak single month was May 2023 at 489 insolvencies, more than double the typical pre-pandemic monthly rate.
• CVL now accounts for almost three in four cases. In 2016, creditors voluntary liquidations represented 63.0% of construction insolvencies. By 2025, that share had risen to 74.5%. This structural shift matters for subcontractors, and the reasons are explained below.
• The trailing twelve months to May 2026 total 4,038. The most recent settled data point (May 2026) recorded 302 insolvencies in a single month, comprising 234 CVLs, 51 compulsory liquidations, and 9 administrations. Year-on-year that month is down 26.7% on May 2025 (which recorded 412), but the rolling 12-month total of 4,038 remains far above the 2016 baseline.^[1]

The full monthly series from January 2016 is available on our UK Construction Insolvency Index page, alongside the annual totals and procedure breakdown used in this article.

What CVL dominance means for subcontractors

There are three main types of company insolvency procedure relevant to construction. Understanding what each means in practice is essential for any subcontractor trying to assess their position when a main contractor gets into financial difficulty.

Creditors voluntary liquidation (CVL)

A CVL happens when a company's directors accept that the company is insolvent and cannot continue. They call a meeting of shareholders and creditors, appoint a licensed insolvency practitioner as liquidator, and the company begins the process of being wound up. The key word in the name is "voluntary": the directors initiate it. It is not forced on them by a court or a creditor.^[2]

For a subcontractor with unpaid invoices or a retention held by that contractor, the appointment of a liquidator is the moment when the situation becomes critical. From that point:

• The company cannot make any new payments without the liquidator's authority.
• All outstanding invoices owed to you become unsecured creditor claims.
• Any retention withheld by the company also becomes an unsecured claim.
• You must register your claim with the liquidator. The liquidator will realise the company's assets (tools, plant, work in progress, debts owed to the company) and distribute the proceeds in a strict statutory order.

The statutory payment order in a liquidation is: (1) insolvency practitioner's fees and expenses; (2) secured creditors (banks and lenders with fixed or floating charges); (3) preferential creditors (employees, certain pension contributions, some HMRC debts); (4) unsecured creditors. Subcontractors are unsecured creditors. In most construction CVLs there is little or nothing left by the time the queue reaches unsecured creditors. Recovery rates for unsecured creditors in construction insolvencies are typically low, often in the single-digit percentage range.

The rising share of CVLs in the overall total matters because CVLs give directors control over the timing and process. A director who sees the business failing has an incentive to act before the position deteriorates to the point where creditors force a compulsory winding-up. Acting early through a CVL means the company's assets are realised in an orderly way, but it also means there is less left for unsecured creditors than in a business that has been trading and collecting cash right up to the point of collapse.

Compulsory liquidation

Compulsory liquidation is court-ordered, typically following a creditor's winding-up petition. A subcontractor who is owed an undisputed sum of more than the statutory minimum can in principle serve a statutory demand and then present a winding-up petition if it is not paid. The court appoints an Official Receiver (and usually a licensed insolvency practitioner subsequently) as liquidator.

In 2025 there were 837 compulsory liquidations across UK construction. Compulsory liquidation counts rose sharply after the pandemic moratorium was lifted: from 154 in 2021 (courts effectively shut to petitions) to 710 in 2023 and 837 in 2025. When compulsory liquidation is the outcome, it usually indicates either that the directors have not acted proactively or that there is a significant creditor dispute driving the petition.

For an unsecured subcontractor creditor, the recovery position in a compulsory liquidation is similar to a CVL: the statutory priority order applies and unsecured creditors rank last.

Administration

Administration is a procedure designed to protect a business from creditor action while an insolvency practitioner attempts a rescue or a better outcome than immediate liquidation. An administrator can keep the business trading, complete existing contracts, and sell the business as a going concern. In 2025 there were 165 construction administrations, representing 3.9% of the total.

Administration is important for subcontractors for a different reason. During administration, a company may continue operating and placing orders. New invoices for work done after the administration date rank as administration expenses and have a higher priority than pre-administration debts. However, any invoices you issued before the administration date remain unsecured pre-administration claims. The practical risk is that a subcontractor continues working on a site not realising the main contractor has entered administration, accumulates more exposure, and only discovers the administration when they seek payment.

Some administrations convert to CVL once a sale or rescue has failed. The Insolvency Service data tracks this separately as "administration converting to CVL". There were 48 such conversions in UK construction in 2025.^[1]

The subcontractor-specific risks

Main-contractor failure and unpaid invoices

Most CIS subcontractors are engaged directly by a main contractor or a first-tier subcontractor. When the entity above you in the supply chain becomes insolvent, every outstanding invoice becomes an unsecured claim. There is no contractual right to payment from the developer or the client above the insolvent entity. Your contract is with the insolvent company, and your rights are governed by insolvency law, not by the project's overall funding.

The larger the outstanding balance and the longer your payment terms, the greater the exposure. A subcontractor with 30-day or 60-day payment terms on a large project may have two or three months of completed work unpaid at any moment. If the main contractor fails mid-project, that entire balance becomes an unsecured claim.

Retentions and the insolvency timing problem

Retentions are withheld for 6 to 18 months after practical completion as a defects liability guarantee. For the entire retention period, the money sits with the contractor. This creates a specific insolvency timing risk: the contractor can deteriorate financially in the gap between practical completion and the end of the defects liability period.

If the contractor becomes insolvent before releasing the retention, the retained amount is an unsecured claim in the liquidation. There is no CIS angle to recover either. CIS deductions are taken at the point of payment. A retention that was never paid has never had a CIS deduction taken from it, so there is no advance deduction to reclaim from HMRC.

For a detailed explanation of how CIS interacts with retentions in normal circumstances, see our guide to CIS retention payments.

The cascade effect

Construction supply chains are long. A developer funds a main contractor, who subcontracts to a first-tier sub, who uses second-tier subbies for specialist trades. When any entity in that chain fails, the insolvency can cascade. The first-tier subcontractor who relied on the main contractor for payment may itself become insolvent within weeks. Second-tier subbies then face insolvency proceedings in two separate estates simultaneously.

The data is consistent with this dynamic. The 49.9% rise in total insolvencies from 2016 to 2025 has occurred across all three SIC divisions (buildings, civil engineering, and specialist activities), not just in main contractors. Specialist subcontractors are being wound up in large numbers, often as downstream victims of failures higher in the chain.^[1]

What drives construction insolvencies: the structural factors

The construction sector has characteristics that make insolvency risk persistently elevated compared to most other industries. These are not new, but the 2016 to 2025 data shows they are becoming more severe.

• Thin margins and fixed-price contracts. Construction projects are typically tendered on fixed prices. Cost inflation in materials, fuel, and labour (all of which accelerated sharply in 2021 to 2023) falls on the contractor's margin if the contract does not include adequate price variation clauses. A project tendered at a margin of 3% to 5% can move to loss quickly under cost pressure.
• Delayed payment as a structural feature. The sector relies on credit throughout the supply chain. Retentions, stage payments, and 30 to 60-day credit terms mean that a substantial portion of money earned is not yet in anyone's bank account. When liquidity tightens, the entire chain is exposed simultaneously.
• Project concentration risk. Many construction businesses depend on a small number of large contracts. The failure of a single project, or the loss of a single client, can be terminal.
• Post-pandemic cost and interest rate environment. The 2022 and 2023 insolvency peaks coincide with the inflation and interest rate cycle that followed the pandemic. Higher financing costs reduced developer activity and squeezed contractor liquidity simultaneously.

The construction output and activity data is tracked separately in our UK Construction Index.

Why company structure matters for trade businesses

Operating as a limited company versus a sole trader does not change your position as an unsecured creditor in someone else's insolvency. However, company structure does affect your exposure when your own business is under financial pressure as a result of a counterparty failure.

A sole trader whose main contractor fails and who is owed £30,000 is personally exposed for the full amount if they have taken on material commitments (equipment finance, labour costs) in anticipation of that income. A limited company in the same position has liability contained at company level, subject to the usual caveats about personal guarantees and director conduct.

For CIS subcontractors, the limited company structure also has a cashflow advantage in normal operations: CIS deductions are recovered in real time through the Employer Payment Summary (EPS) process rather than waiting for the annual Self Assessment return. This faster recovery reduces the working capital gap, which in turn reduces the financial stress that can make a business vulnerable when a client fails to pay. For a full comparison of the two structures, see our guide on CIS: sole trader or limited company.

Subcontractors who operate as limited companies within CIS have a dedicated service overview at CIS for limited companies.

Gross payment status and cashflow resilience

Gross Payment Status (GPS) allows a subcontractor to receive every payment in full, without the 20% CIS deduction. For a subcontractor with GPS, the absence of the in-year deduction means more working capital is available at all times. When a main contractor fails to pay an invoice, a GPS holder has not had 20% of that invoice pre-deducted. The full outstanding amount is the loss (which is not better in isolation), but the subcontractor's overall cashflow position is stronger, which provides more resilience to absorb a bad debt without triggering their own financial distress.

Full details of GPS eligibility and the application process are at our gross payment status service page.

Practical credit control measures

No contractual or accounting structure eliminates the risk of counterparty insolvency. The most effective defences are operational.

• Short payment terms. Negotiate 14-day payment terms where possible. The longer the credit period, the more completed work sits as an unsecured debt at any moment.
• Stage invoicing. On larger or longer contracts, invoice at defined stages rather than monthly or at completion. This reduces the maximum outstanding balance at any point.
• Check your contractor's financial health before starting work. Companies House filings (accounts, confirmation statements), credit reference agency reports, and payment behaviour on previous contracts are all publicly available or can be obtained cheaply. A contractor with late-filed accounts, declining reported assets, or a history of county court judgements is a higher-risk client.
• Keep contract documents in order. In any insolvency, your ability to register a claim and provide evidence depends on having a clear paper trail: signed contract or order confirmation, all invoices with delivery evidence, all correspondence about disputed amounts. Without documentation, your claim may be reduced or rejected by the liquidator.
• Monitor the HMRC monthly CIS return process. Contractors must submit a CIS300 monthly return. If a contractor misses returns or is late, it may be a leading indicator of financial difficulty. Your payment deduction statements (which contractors are obliged to issue monthly) are a practical check on whether the contractor is keeping their CIS obligations current.
• Understand your retention position. Keep a written register of every outstanding retention: which contractor holds it, how much, when the defects liability period expires, and what the contract says about release. Do not let retentions disappear off your radar during a long defects period.

What to do if your contractor enters insolvency

• Stop work immediately unless you have independent legal advice confirming the administrator has adopted the contract and will pay post-administration invoices as an administration expense.
• Register your claim with the insolvency practitioner as early as possible. The liquidator or administrator will issue claim forms. Include all outstanding invoices, deduction statement discrepancies, and retention amounts. Provide copies of all supporting documents.
• Do not write off the loss immediately for tax purposes until the insolvency process is sufficiently advanced to confirm the debt is irrecoverable. Your accountant can advise on the correct timing and treatment of bad debt relief in Self Assessment or Corporation Tax.
• Check whether any amounts were personally guaranteed. Some developer or client contracts include "pay when paid" clauses that are void under the Housing Grants, Construction and Regeneration Act 1996. Others include step-in rights that allow the client to pay subbies directly in certain circumstances. These are contractual points to raise with a solicitor.

The numbers in context

4,188 construction insolvencies in a single year means, on average, more than 80 construction companies becoming insolvent every week in England, Wales and Scotland. In May 2023, the peak month in the dataset, 489 companies were registered insolvent in a single month. That is approximately 22 per working day.^[1]

These are not mainly large, nationally known contractors. The SIC Section F data covers companies of all sizes, from one-person specialist subcontractors to multi-million-pound regional main contractors. The majority of cases by volume are small companies. This means the risk is distributed throughout the supply chain, not concentrated at a tier of large, visible businesses. Any subcontractor, at any level of the chain, is a potential unsecured creditor.

The structural rise from 2,793 to 4,188 over nine years reflects the increasing financial fragility of the sector. Understanding that fragility, and managing exposure to it, is part of running a sustainable trade business in 2026.

Our UK Construction Insolvency Index is updated each month as the Insolvency Service publishes new data. The full monthly series, annual totals, and procedure breakdown are freely available with attribution under OGL v3.0.

1. The Insolvency Service, "Company Insolvency Statistics -- Record-Level Data for England, Wales and Scotland," data through May 2026, published 19 June 2026. gov.uk/government/statistics/company-insolvencies-may-2026. Figures compiled in our UK Construction Insolvency Index. Data sourced under the Open Government Licence v3.0.
2. The Insolvency Service, "Creditors Voluntary Liquidation (CVL)," guidance, gov.uk. Available at gov.uk/government/publications/liquidation-and-insolvency.