According to the Insolvency Service, the construction industry experienced 1,801 insolvencies in the 12 months to February, more than any other sector. While this reflects the relatively large number of active companies compared with other industries, it also serves as a warning to act with caution when dealing with others.

Covid measures expiring

As we emerge from the pandemic, the economy is in optimistic mood. However, businesses are experiencing challenges with sourcing materials, staff shortages and the prospect that more companies are likely to fail as government business support measures tail off.

Already some covid-support measures have expired, such as the suspension of liability for wrongful trading that expired in June. At the end of September, the restrictions on the use of statutory demands and winding-up petitions expired and the new prohibition on using “ipso facto” clauses (contractual rights that entitle suppliers to walk away from a customer that becomes insolvent) now apply to small company suppliers. Given the relaxation of the above restrictions, many are forecasting an increase in insolvencies in the coming months.

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