The UK economy in 2025 has been testing businesses across almost every sector, but two industries stand out as bearing the heaviest weight: construction and hospitality. Both employ hundreds of thousands of people, support regional economies, and act as lifelines for local communities. Yet both are finding themselves among the hardest hit when it comes to company insolvencies this year.
Simple Liquidation has been monitoring these developments closely. As insolvency practitioners with decades of experience, we know that behind every statistic lies a story of directors struggling to keep things going under unprecedented pressures. This blog explores why construction and hospitality insolvencies remain so high in 2025, what the drivers are, and most importantly, what company directors can do if they feel their own business may be heading down a similar path.
Construction Insolvencies: The Leading Sector
Insolvency data published this summer showed construction continues to be the most affected sector, accounting for around 17% of all company failures in the UK. That figure represents nearly 4,000 construction businesses over the past 12 months: small contractors, regional builders, and even some mid-sized firms that had previously weathered the storms of Brexit, the pandemic, and rising material costs.
The question many ask is: why construction?
1. Rising Input Costs
The cost of materials remains volatile. Timber, steel, and cement prices have all seen sharp fluctuations due to global demand shifts and energy price shocks. While large developers may have the scale to absorb these rises or renegotiate contracts, small and medium-sized firms often operate on fixed-price agreements. Any unexpected cost spike erodes already tight margins and pushes directors into untenable positions.
2. Labour Shortages
The industry continues to face a skilled labour shortage, which has only worsened since the pandemic. With demand outstripping supply, wages have risen significantly. For companies locked into contracts, those higher wages often cannot be recovered from clients.
3. Late Payments and Cash Flow
Construction is notorious for long payment terms and complex supply chains. When just one link in that chain delays or defaults, the impact ripples down. Many insolvencies stem not from a lack of demand but from cash flow strain caused by delayed payments.
4. Interest Rates and Borrowing Costs
With interest rates elevated through much of 2024 and into 2025, borrowing has become more expensive. Construction companies often rely on short-term financing to fund projects, and higher repayment obligations have tipped many into insolvency.
The unfortunate result is a sector where directors are more vulnerable than ever. Even competent, long-standing firms can find themselves in difficulty through no fault of their own.
Hospitality Insolvencies: A Close Second
Hospitality has always been a resilient sector, yet the challenges of 2025 are testing even the most innovative operators. Recent figures showed 1,700+ hospitality businesses became insolvent in the first half of this year alone.
1. Energy and Food Costs
Restaurants, pubs, and hotels are especially exposed to energy costs. While wholesale energy prices have softened compared to their 2022 peak, they remain significantly above pre-pandemic levels. Add to that the rising cost of food imports and domestic produce, and the pressure on margins is intense.
2. Consumer Spending Patterns
Cost-of-living pressures mean households are cutting back on discretionary spending. Meals out, hotel stays, and nights at the pub are often the first luxuries to go. Businesses that depend on steady footfall are struggling to fill tables or rooms, even when demand seemed to recover after the pandemic.
3. Wage Pressures
Hospitality is labour-intensive. With the rise in the National Minimum Wage and competition for staff, payroll has become one of the largest fixed costs. Unlike retail, where technology can offset labour needs, hospitality still requires people at the front line.
4. Debt Legacy from Covid
Many businesses in hospitality relied on government-backed loans during Covid-19. Those repayment obligations are now biting. Combined with reduced revenue, the debt burden has tipped many businesses into formal insolvency procedures.
Broader Market Conditions Driving Both Sectors
Construction and hospitality are not isolated cases, they are reflective of the wider UK insolvency landscape. July 2025 alone saw over 2,000 insolvencies, a slight rise on June, and the pattern suggests the country could face 24,000+ company failures by year-end.
High interest rates, inflationary pressures, and tighter credit are common denominators across multiple industries. Yet construction and hospitality share a further challenge: they rely heavily on consumer confidence and forward-looking demand. When households tighten their belts or when developers hesitate to green-light projects, these sectors feel the pain faster than most.
What This Means for Company Directors
For directors operating in these industries, the reality can be daunting. A once-profitable business can become insolvent almost overnight due to factors outside of management’s control. However, knowing the options available can make all the difference.
Creditors’ Voluntary Liquidation (CVL)
If your company is insolvent and cannot pay its debts, a Creditors’ Voluntary Liquidation may be the most responsible course of action. A CVL allows directors to take control of the closure process, appoint a licensed insolvency practitioner, and ensure creditors are treated fairly. Importantly, it helps directors avoid the reputational and legal consequences of being forced into compulsory liquidation by the courts.
Members’ Voluntary Liquidation (MVL)
For solvent companies, for example construction firms that want to retire or hospitality operators selling up, an MVL is often the most tax-efficient way to close. Directors can extract funds as capital, often paying less tax than if withdrawing as income.
Restructuring or Rescue Options
Sometimes liquidation is not the only answer. Company Voluntary Arrangements (CVAs), administration, or informal creditor negotiations may provide breathing space. The right route depends on the circumstances, but professional advice is critical to avoid worsening liabilities.
How Simple Liquidation Can Help
Simple Liquidation provides directors with a quick and straightforward solution to liquidate a company. Our liquidators are authorised by both the Insolvency Practitioners Association and the Institute of Chartered Accountants in England and Wales. With over 30 years’ experience, directors Jamie Playford (FABRP MIPA) and Alex Dunton (MABRP), alongside our dedicated team, have guided hundreds of businesses through solvent and insolvent processes.
We are not an intermediary, broker, or sales company. We are a team of insolvency professionals who deal with liquidations day in, day out. That means we cut through complexity, manage communications with creditors, and support directors with clear, actionable advice.
We also understand that cost is a key concern. Many directors delay seeking help because of fear of high fees, but this can lead to worse outcomes, including personal risk for trading while insolvent. Our approach is transparent, cost-effective, and built around reducing stress for directors.
Why Acting Early Matters
One of the most common things we hear from directors is: “I wish I’d acted sooner.” Waiting rarely improves matters, it only allows debts to mount and options to narrow. Acting early, by contrast, can preserve reputations, reduce personal risk, and in some cases even save the business through restructuring.
For those in construction and hospitality, sectors under sustained pressure, the message is clear: seek advice at the first signs of difficulty. Whether that leads to liquidation or an alternative solution, the important thing is regaining control rather than waiting for creditors or the courts to decide your company’s fate.
Final Thoughts
2025 is shaping up to be one of the most challenging years for both construction and hospitality. Insolvency levels remain high, and the pressures of costs, labour, and demand are unlikely to ease quickly. Yet directors are not powerless. By seeking professional, experienced advice, they can make informed choices and avoid the pitfalls of delay.
Simple Liquidation is here to help directors across the UK, whether you need to close a company through a CVL, plan a solvent exit via MVL, or explore whether restructuring could provide a lifeline. A no-obligation conversation with our team could be the first step toward clarity and control.
If you are concerned about your construction or hospitality business, get in touch today. With a straightforward approach, deep expertise, and genuine care for directors in tough situations, we will help you navigate insolvency with confidence.