A leading construction expert has warned that, while the anticipated fallout from the collapse of ISG last year has “yet” to be fully realised, construction contractors may still feel pain in the near term as investors keep their powder dry and await anticipated spending cuts and cost pressures from the upcoming Autumn Budget.
Construction firms and supply chain partners may have narrowly escaped an anticipated uptick in administrations according to recent insolvency data analysis, but pre-Budget jitters and Gateway 2 pressures are among a litany of market forces also impacting on the current rate of activity in the construction sector, without the lingering effects of ISG still hanging in the air.
Construction Products Association (CPA) economics director, Noble Francis, has urged caution as tax hikes and potential spending cuts in the Autumn Budget out next month (26 November) could still spell danger well into FY2026, compounding existing wage concerns, investor confidence and ongoing delays related to approvals still going via the Building Safety Regulator (BSR).
The analysis comes as 3,934 insolvencies were recorded in the UK construction sector in the year to August, which was ‘lower than anticipated’.
And while firms may breathe a momentary sigh of relief after years of rampant insolvencies, Francis has warned the full effect of ISG going into administration in September last year may “yet” be on its way, which is a signal the supply chain can ill-afford to forget amid the mounting and omni-directional pressures it also currently faces.
“We were expecting insolvencies to start to rise again in 2025, due to the delayed impacts of ISG’s administration in September 2024 on the supply chain, the effects of the Building Safety Regulator delays on high-rise starts, a slowdown in housing demand and home improvements remaining subdued, as well as April’s rise in employers’ National Insurance Contributions, and the lower thresholds, which have raised firms’ wage cost,” said Francis, airing his concerns on social media this week.
“But, despite many firms currently feeling the pain, it hasn’t led to a rise in insolvencies, yet. However, firms currently suffering may encounter more problems in 2025 Q4 and then in 2026 H1, given the impact of a lack of a pickup in demand in Autumn so far due to pre-Budget uncertainty affecting households, businesses and investors, as high-rise delays continue, and as cost issues remain, with potentially more pain to come due to the upcoming tax rises and, potentially, also spending cuts in the Budget.”
The analysis comes as administrators of ISG have recovered £26.3 million from its debtors and retentions, a portion of which will result in a cash payout to former staff of the failed contractor but not for its supply chain.
The sum is more than double original estimates from EY.
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Kelly Boorman, national head of construction at RSM UK, said contractors are in a state of “limbo”, clinging to workforces in anticipation of future project starts, while the threat of key government announcements means “volumes aren’t materialising quickly enough to sustain this level of overhead”.
Amid uncertainty around the upcoming Autumn Budget, delayed capital deployment and limited access to acceptable debt is leaving smaller firms – who are already the worst-affected group – exposed, Boorman urged.
In August, 290 construction companies went out of business, down from 332 in July, marking an 11.8 per cent decrease from August 2024 (329).
This was the lowest monthly total since July 2023, and an 8.7 per cent fall from the total insolvencies recorded in the previous 12-month period.
However, the construction industry remains the sector with the highest number of company failures in England and Wales over the past year, recording 3,934 collapses in the year to August.
The Autumn Budget is expected to raise costs for construction contractors with a few key announcements, including higher employers’ National Insurance Contributions as well as potential tax hikes, whose burdens will inevitably be passed on to clients, impacting project costs and investor confidence.
Leading construction consultancy, Arcadis, has outlined a few key trends in its Autumn 2025 UK Construction Market View report:
- New builds up slightly in Q2, confirming 12 months of slow growth.
- Orders slowed in Q2, but pipelines show signs of recovery.
- London continues to sputter, particularly residential.
- Public sector is reliable but not enough to drive recovery.
- Despite momentum in water and energy, progress is slow relative to spend.
- Inflation forecasts remain unchanged.
“Total output grew by 1.2 per cent in Q2 2025, with ONS data showing a 1.1 per cent increase in new work output. However, on a monthly basis, June saw a 0.4 per cent decrease in new work activity, with commercial and infrastructure dragging down the overall new work levels,” Arcadis said.
“The figures highlight the fragile and uncertain nature of the new-build market currently, a theme picked up by the Construction Products Association which maintained its overall growth predictions for the sector in their Summer 2025 update, keeping their figures unchanged at 1.9 per cent for 2025 and 3.7 per cent in 2026.
“One of the reasons for a relatively slow recovery is the current state of the London construction market. It is clearly stuck in the cycle. London has traditionally been the engine for a private sector-driven recovery, so this is a broader problem. Based on latest Q2 2025 regional orders data for London, the new build pipeline has contracted by nearly 30 per cent despite some big infrastructure orders earlier in 2025.”
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