A new analysis of Companies House data reveals that nearly 39.9% of newly established building development and house building companies in the UK have closed within five years. The study, conducted by GB Concrete & Pump, highlights the significant challenges facing the sector amid volatile market conditions and the risks for companies attempting to establish themselves in construction.

High Failure Rates in the Building Development Sector

The study, covering company data from January 2019 to December 2023, looked at incorporation records across key segments of the building development industry. By tracking companies that have entered administration, liquidation, or dissolution, the findings paint a clear picture of survival rates across several building sub-sectors.

Across all categories examined, a striking 41.1% of new companies have ceased operations. However, the closure rates vary significantly across different construction segments, indicating unique pressures faced within each sub-sector:

Demolition: With a closure rate of 56.3%, the demolition industry emerges as the most volatile, with over half of new companies unable to sustain operations in this competitive and capital-intensive sector.

• Site Preparation: 46.6% of firms specialising in site preparation have closed, reflecting the high operational costs and challenges of the field
• Construction of Commercial Buildings: Commercial building construction companies have a closure rate of 45.7%, highlighting the competitive nature of the sector.
• Domestic Building Construction: Although slightly lower, 43.8% of domestic building firms have closed, suggesting that even housing-related projects are not immune to market fluctuations
• Building Project Development: In contrast, this sector has shown more resilience, with a relatively lower closure rate of 33.9%, indicating that project developers may have more opportunities for sustainable growth

The Takeaway

The recent Labour budget announcement has introduced a potential lifeline for small housebuilders, promising an additional £3bn in guarantees. However, industry experts caution that the measures may come too late for companies already struggling under economic pressures.

Commenting on the findings, our spokesperson for GB Concrete & Pump, Director Vinny Singh said: “Our analysis reveals the reality of operating within the building development and housebuilding sector. With nearly half of new companies struggling to stay open, it’s essential for newcomers to recognise the challenges and strategically plan to improve their odds of long-term success. The high closure rate of new businesses could potentially impact the overall growth and innovation within the sector. Fewer new entrants could lead to a less dynamic and competitive market, potentially affecting the supply of new homes and commercial buildings. Although Labour has confirmed an additional £3bn in guarantees to support small house builders, it may already be too late for firms already struggling to afloat. Not to mention, it is not yet clear how this support will be allocated.”