Financial Risk Management in Construction: How to protect your projects from supply chain disruption

Despite its essential role in the UK economy, the construction industry continues to face the highest rate of financial distress across all sectors. Rising insolvencies, delayed projects, and strained supply chains are putting contractors and clients at risk: why are statistics so dismal?  

It’s a sad fact that construction companies continue to face serious financial difficulties more than any other industry, even half a decade on from the pandemic. Building output has slowed: higher-risk buildings are taking longer to be built as they go through the Building Safety Act Gateway approval stages, yet we want to make sure buildings are safe during the build through to occupation. Meanwhile insolvencies have increased, resulting in the negative spiral of other contractors and their projects being affected. 

But what can contractors do to manage counterparty risk in their construction works? Are there any construction risk management tools available? 

In this blog, we dissect the recent state of the construction insolvency landscape, why this might be happening, and what contractors can do to get ahead of any severe supply chain difficulties and manage the impact on their projects. 

 

Construction insolvency landscape: What is the current state of the construction industry? 

Based on research by the ONS, the UK construction industry shows a mixture of statistics:  

• New construction orders in 2025 Q1 were up 26.6% from 2024 Q1, indicating growth since last year; in March 2025, construction output increased by 0.5%. 
• However there was no growth in construction output for 2025 Q1 compared to the previous quarter.  

Despite this, UK annual construction output increased between 2023 and 2024 by 0.4%: by the end of 2025, the impact of the Building Safety Act’s standards is set to be felt as more suppliers are required to meet minimum compliance and health and safety standards to work on higher risk buildings. 

Even though results show construction industry output is on the rise, albeit small, a higher volume of supplier insolvencies are still being recorded: as a result, main contractors and clients risk their projects being affected if proactive measures are not in place.

 

Regarding construction supplier insolvency, construction unfortunately made up 17% (4,031) of insolvencies in all industry cases in the year up to January 2025.

 

• In February 2025, construction insolvencies in England were up 20% (367) from January 2025 (306) 
• This is an increase of 3% from February 2024. 
• In fact, more insolvencies were recorded by March 2025: a further 377 construction firms became insolvent, making up 18.1% of all insolvencies in England and Wales in the same month. 

 

Image source: BCIS https://bcis.co.uk/news/construction-insolvencies-latest-news/

 

What are the consequences of a construction subcontractor going insolvent? 

Due to the changing UK economy, rising inflation and cost of living, it’s no surprise that an alarming number of insolvencies have been reported in the construction industry. But what happens if you’re a main contractor, or client, and one of your key subcontractors become insolvent: what happens to your project?

Contractual penalties from the build client 

With no replacement subcontractor, project builds face hefty delays. Consequently, this incurs further costs trying to tender and find another suitable, competent supplier at short notice.

Damage to reputation: yours and the client’s  

For many subcontractors, it’s out of their hands if they become insolvent: working in the construction market is tough, with tight margins and a growing construction skilled labour shortage. As a result, with no contingency plan in place, main contractors risk severe delays and public scrutiny if projects fail to be delivered on time. 

While not all risks can be eliminated, proactive steps can significantly reduce their impact – especially with the right tools in place. 

By using counterparty risk management solutions like Risk Radar, main contractors put themselves at an advantage to get ahead of supply chain difficulties and assess financial risk in their construction projects. 

Case Study: The impact of construction insolvency on housing contractors 

Henley Construct, a construction company for residential builds, went into administration in 2023. In 2025, the financial ripple effects are still being felt: as a result, the landlord (Optivo Development Services – ODS, now merged to Southern Housing Group) filed a claim for its missing funds of £36 million. However, it was cited that ODS “do not expect that any money will be available to cover the debt”.

Not only have people lost their jobs, but also the possibility of more homes being built for future homeowners. It also means a delay to the Labour government’s plans to build 1.5 million new homes in England by 2029. 

While the construction sector has recovered from the height of the Covid-19 disruption, its effects still linger through material shortages and supply chain volatility. Paired with tight margins in construction and rise in material costs and shortages (such as sand), we may see more unfortunate outcomes like this. 

 

How to mitigate financial risk in Construction 

How can you protect your construction supply chain and future projects? 

Despite the news of insolvencies increasing in construction, tools such as Risk Radar are available to help forecast financial distress and mitigate construction supply chain risk. An exclusive add-on for Main Contractors, Risk Radar supports your construction risk management activities. 

Sourcing reliable insights shouldn’t cost the earth. 

They should be accessible and actionable, helping you make informed decisions without unnecessary complexity. 

With some of the latest data points in the industry, Risk Radar helps monitor risk management in your construction projects and reduce further negative ripple effects. 

 

 

Risk Radar: The go-to financial risk solution for your construction projects 

How can you get a better oversight of your construction supply chain? How about being able to detect financial distress before it becomes a problem? 

Our intuitive Risk Radar solution is comprised of key features to help you effectively manage supply chain risk: 

• Proactive Risk Management: Early forecasting of risks in the supply chain and continuous, real-time monitoring with daily data refreshes and exception-only alerts. Early warning notifications help businesses take proactive action to mitigate potential issues before they escalate. 

• Industry-Specific Data: Risk Radar leverages precise, construction-specific data, delivering significantly higher accuracy for firms under the £15M turnover threshold, based on internal benchmarking and construction-specific modelling. 

• Efficient Decision-Making: Designed for the construction and facilities industries, Risk Radar simplifies risk management with intuitive workflows, enabling teams to make timely, informed decisions from one platform. 

 

Case study: How Risk Radar supports Curo Construction’s decision-making 

Is it possible to grow your supply chain and mitigate risk? It turns out, yes! With our Risk Radar solution, Curo Construction grew its supply chain by 150% in just 6 months, all whilst minimising risk.

“My advice to other contractors would be to stop using the old methods of Companies House or credit check businesses, and instead take a strategic approach to strengthening your supply chain with Risk Radar.” 

Learn more 

 

What else is included in Risk Radar? 

Our latest Risk Radar features include: 

• Contagion Risk: Identify subcontractors working with at-risk main contractors and anticipate cash flow issues that could impact your suppliers. By unveiling these risks, you can take proactive measures to protect your business from financial instability. 
• Network Distress: Comprehensive, real-time visibility into the financial health of organisations across the construction sector. This feature empowers you to conduct in-depth due diligence and stay ahead of potential risks. 

 

Key takeaways 

With Risk Radar, we can help support your financial and supply chain risk management for your construction projects: 

• Access supplier risk insights as soon as they become available, powered by daily data refreshes and proactive alerts 
• Enriched data: insights from HSE, Company Watch, ICO, EA, Employment Tribunal and Constructionline 
• Monitor your supply chain health 
• Embedded visualisation tools to support your decision making

 

Ready to transform your construction supply chain risk management?  Book a demo to see Risk Radar in action.