Sharp spike in February business failures

More than three times as many construction-sector firms went under in February than in January, the latest data from Creditsafe shows.

The February total of 32 administrations reverses a recent downward trend that saw the casualty list halve in December and fall to just 10 firms in January.

The figures for the second month of 2025 are the highest monthly toll since November 2023, when 33 firms went under.

Three-quarters of the firms in the February list had four employees or fewer, eight of them employed no staff below director level and seven were overdue filing their annual accounts with Companies House.

Just three companies in the latest data were large enough to file detailed turnover and profit figures in their accounts.

Dorchester-based Acheson Construction was the highest-turnover firm to enter administration, after Grant Thornton was called in on 18 February.

Forty of the contractor’s 48 employees were made redundant immediately. Grant Thornton said the eight remaining Acheson Construction employees will assist in winding down operations.

“The business has been impacted by increased costs on fixed-price contracts, delays in the commencement of new projects and a dispute over amounts due under a key contract,” said Richard Lewis, one of the administrators.

“While the directors had considered alternative options, they sadly concluded it was no longer viable to continue to trade.”

Acheson Construction was established in 1976. The firm specialised in industrial, commercial and leisure projects in South West England.

It posted turnover of £53.6m in the year ending 29 December 2023, up from £48.3m in 2022. And its pre-tax profit of £46,000 marked a recovery from a £477,300 loss the year before.

The firm employed a monthly average of 88 staff during that year.

Its parent company LMR Holdings Ltd continues to trade.

Another notable casualty was Birmingham-based mechanical and electrical (M&E) contractor JS Wright & Co, which called in FRP Advisory on 12 February.

The 135-year-old company, which became an employee-owned trust in 2021, was responsible for M&E work during the refurbishment of Grenfell Tower. However, the inquiry into the June 2017 fire there did not criticise JS Wright & Co or its employees.

The firm also delivered M&E work on residential and commercial schemes such as the 37-storey Nine Elms Point in London and phase one of the £700m Paradise Birmingham scheme.

In its most recent financial year ending 29 April 2023, JS Wright reported turnover of £41.8m and a pre-tax profit of £510,000, with an average monthly staff count of 160.

But facing a “likely shortfall” in working capital – cash in hand fell from £5.7m to £850,000 in its most recent accounts – the firm obtained a £1.35m loan from its former shareholders.

In January this year, JS Wright extended its accounting period to cover 17 months to 30 September 2024.

Isle of Wight-based MK Assets Ltd called in receivers from Gunnercooke on 3 February. Its accounts for the year to 31 March 2024 were overdue, but its previous set revealed turnover of just £350,000, down from £425,000 the previous year.

The firm also slipped into the red, posting a loss of £10,000 compared with a £10,400 pre-tax profit in 2021/22.

Among the other casualties in February was Nottingham-based Jestermark Ltd, which traded as NG Shopfront Systems.

The firm entered administration with Opus Restructuring on 13 February after making all 14 of its staff redundant.

Jestermark collapsed after a “sharp fall” in new orders, the administrators said in a statement.

They added that they were “working to collect the outstanding debts and sell the plant and machinery”.

Jestermark’s most recent accounts to 30 September 2024 showed net assets of £392,000, down from £413,800 the year before.

Its short-term repayable bank loan debt rose by almost £5,000 to £53,500, while its long-term loan debt fell from £225,8008 to £166,300.

Outlook

Paul Reidy, head of construction banking at merchant bank Arbuthnot Latham, warned of difficulties ahead.

He singled out the increase in employer National Insurance contributions from April this year as a step that “will elevate employment costs for construction firms, further compressing profit margins in an industry where they are already significantly constrained”.

Tim Chance, head of trade credit at insurance firm Gallagher, agreed with Reidy and added: “While there is positive talk around an increase of housing projects across the UK, there is a lot of nervousness in the sector that large infrastructure projects could be scaled back or delayed.”

Reidy told Construction News that the rise in administrations paradoxically “coincides with a period of positive sentiment, as contractors have navigated through the final stages of their loss-making legacy fixed-price contracts”.

He added that there were “several challenges” in the surety bond market for UK contractors.

“Recent high-profile insolvencies have had a significant impact on the market, continuing into this year,” Reidy said.

“These events have led to tighter underwriting standards and reduced bond capacity, making it more difficult for contractors to obtain bonds. When bonds are available, they often come with higher premiums.”

Chance said that “capacity and appetite are still present” for surety bonds, but “many construction firms may face challenges due to having a weakened financial position”.