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Across the UK, a number of small to medium-sized building firms are, at best, feeling the squeeze or, at worst, facing bankruptcy. News stories of contractors winding up or going bankrupt are becoming worryingly familiar. Yet, while some firms are struggling to stay afloat, others are riding out the storm — even thriving. So what’s going on? And more importantly, what can you do to ensure your business is among those that don’t just survive but enjoy a long and successful future?

What’s behind the bankruptcy story?

According to this report, the construction sector represents 17% of all insolvencies, despite only creating 6.4% of total UK GDP. That’s a worrying number! It’s a tough time for construction. A combination of high material costs, labour shortages, rising interest rates, and economic uncertainty has created a perfect storm for possible bankruptcy. Local authorities are being slow granting planning permission. Clients are delaying projects, being more cautious with spending, and, in some cases, pulling out altogether. Meanwhile, builders are caught between fixed-price quotes and escalating costs, eating into already slim profit margins. The FMB has reported workloads for small building companies fell by 8% in the last three months of 2024.

Then there’s the issue of cashflow. Late payments and long payment terms remain a major headache for small firms. With limited reserves, just one or two delayed invoices can tip a business over the edge — particularly if they’ve overstretched or taken on risky projects to fill the order book. Why are some building companies weathering it better?

It’s not just down to luck. The businesses staying in control are usually the ones who:

• Know their numbers inside out – They’re accurately costing jobs, forecasting cashflow, and tracking profit on every project.
• Only take on the right kind of work – They avoid jobs with low margins, unclear specs, or unreliable clients.
• Market consistently – They don’t wait until they’re quiet to start finding new leads. They’ve built a steady pipeline.
• Think outside the box – They diversify and offer an additional service.
• Use the right software tools – From estimating to health and safety, they’ve invested in software that saves time and reduces risk.

In contrast, struggling firms are often flying blind — pricing jobs on guesswork, relying on outdated spreadsheets, and only reacting when problems arise.

What might have gone wrong for these struggling construction companies?

• Underestimating costs – Fixed-price quotes without factoring in rising material and labour costs.
• Taking on too much – Chasing turnover rather than profit. More work doesn’t always mean more money.
• Poor project planning – Jobs running over time and budget, with knock-on effects for the next one.
• Lack of visibility – No real-time data on how projects are performing or where the business is heading.
• No business development strategy – Relying solely on word-of-mouth or repeat business, then going quiet when leads dry up. Or they’re not moving with the times.

What you can do right now

• Review your quoting process – Make sure you’re pricing properly and including healthy margins. Estimating software like EstimatorXpress can help you get it right every time.
• Outsource to focus – What jobs could you outsource so you can focus on your business? Estimating is an obvious one. Consider the HBXL Estimating Service.
• Stay on top of job progress – Monitor your build programmes and costs with job management software like BuildProjex to keep everything on track.
• Keep building your pipeline – Don’t stop marketing when you’re busy. A steady flow of enquiries protects you from dry spells.
• Diversify – offer Design as well as Build. Benefit from a second revenue stream. PlansXpress makes the prospect so much easier.
• Manage risks – Use ContractsXpert to agree clear terms, and Health & Safety Xpert to protect your team and stay compliant.
• Upskill or really nail your knowledge – the HBXL Skills Academy is a good example of practical estimating, CAD and business management training – that’s free.
• Take advantage of free advice – HBXL provide a number of free, short guides: Business Planning, Risk Mitigation, Winning new work, Estimating effectively… You’ll find them here.
• Get help if you need it – Don’t struggle in silence. Talk to your accountant or a business advisor early if cashflow’s tight.

What next

Hopefully bankruptcy isn’t even in your line of sight. All the same, it’s important it stays that way. Complacency isn’t an option. It’s time to take action, get organised and run your business as effectively as you can. At HBXL, we’re here to help you do just that. Call us on 0117 916 7898 to discuss your business and the digital solutions available to you. Ask for a short online demo or try our software for yourself – free.