SME Construction data casts doubt on UK ability to hit 1.5 million homes
The number of struggling construction firms has risen further despite heavy pressure on the sector to deliver hundreds of thousands of new homes.
The number of firms in critical distress – a measure of firms nearing bankruptcy – rose 15.8 per cent in the second quarter of 2025, according to Begbies Traynor, while the number of construction firms in critical and significant financial distress topped charts in the first quarter, at 6,830 and 97,603 firms respectively.
“SMEs are grappling with a range of cost pressures, including strict environmental regulations and burdensome taxes on employers. These cost pressures are making it increasingly harder – not easier – to build,” Steven Mulholland, CEO of the Construction Plant-hire Association (CPA), said.
The industry was the slowest growing sector of the UK economy in the first quarter of 2025, and total construction output stagnated in this period – ending three consecutive quarters of growth as activity across real estate softened.
“Employer National Insurance hikes have already hit jobs and investment. Now, looming changes to Business Property Relief risk being the final blow – threatening 200,000 jobs and £15 billion to the economy, and punishing the very firms Britain needs to deliver growth, infrastructure and homes,” Mulholland added.
“Without urgent reform, we won’t just miss housing targets – we’ll lose the wider supply chain capable of building the vital infrastructure Britain needs,” he said.
Construction firms in ‘a difficult position’
Kelly Boorman, National Head of Construction at RSM UK, has warned that the combination of high financial distress in the industry and the government’s housing push puts the sector in a tough place.
The government has pledged billions to support housebuilders, something which has been largely helped by the industry, but Boorman warned business could fall into an “overtrading trap”.
“There’s the risk [they]… take on more work than their supply chains and operational capacity can support,” Boorman said.
“Mandatory housing targets and expectations to commit to large infrastructure projects could result in businesses being unable to meet demand, despite the government’s commitment to investment, training and pipeline visibility,” she added.
Experts have warned that there are still significant planning and delivery challenges that developers are facing alongside cost pressures, including skills shortages – despite recent investments – wage inflation, raw materials shortages and inflation.