Is My Construction Company Going Bust? 10 Warning Signs
The short answer
Test this week: can the company pay debts as they fall due, and are assets worth more than liabilities? If either answer is no, see a licensed insolvency practitioner now, while you still have options.
- Construction leads the insolvency figures: 3,866 company insolvencies in England and Wales in the 12 months to August 2026 (Insolvency Service).
- There are two tests. Cash flow: can you pay debts on time? Balance sheet: are liabilities bigger than assets? Fail either and you may be insolvent.
- Your duties change. Once insolvency is possible, put creditors first. Wrongful trading can make you personally liable.
- Early beats late. Time to Pay, a moratorium, a CVA or administration can save a viable company — before a winding-up petition freezes the bank account.
If you are reading this at night asking whether your construction company is going bust, you already suspect something. That instinct is worth listening to. The directors who come through are the ones who act early.
Construction had more company insolvencies than any other industry, according to the Insolvency Service. That was 3,866 in England and Wales in the 12 months to August 2026. Many of those firms were busy right up to the end.
This is general information from a contractor's experience, not legal or financial advice. For your situation, speak to a licensed insolvency practitioner or an accountant. If the business may still be saved, book a free strategy call and we'll go through your numbers.
The 10 warning signs
The first five come from the Insolvency Service. The other five are the red flags we use in our own company and with clients. Count how many are true for you today.
- Suppliers have put you on stop or only take payment upfront.
- Reminder letters or recovery threats arrive every month, not once.
- PAYE, VAT or CIS gets paid late, or not at all, to keep the lights on.
- You borrow at high interest (or put your own money in) to make payroll.
- Turnover is high but profit is low. Gross margin under 20% is our red flag.
- New deposits are finishing old jobs. Each new client is paying for the last one.
- Cash after tax covers under 1 month of overheads, and never gets back above it.
- Big invoices sit 30+ days overdue while your own bills come due weekly.
- Live jobs are 5+ margin points below the quote, and nobody knows why.
- Under 4 weeks of signed work ahead. You'll feel it in the bank 6–8 weeks later. Worse if it all comes from one client: see what to do when one client gives you most of your work.
One or two of these is a bad month. Four or more, every month, is a pattern. Run the tests below.
The two tests, in plain English
These are the two basic tests the Insolvency Service uses when it looks at a failed company and how its directors behaved.
| Test | The question | You may be failing it if… |
|---|---|---|
| Cash flow | Can the company pay its debts as they fall due? | Suppliers chase, accounts go on stop, HMRC arrears build up |
| Balance sheet | Are the assets worth more than the liabilities (including future ones)? | Debts, loans, tax and creditors add up to more than cash, debtors, kit and work in progress |
There is also a hard trigger in the law. A creditor owed more than £750 can serve a statutory demand. If the company doesn't pay, secure or settle it within 3 weeks, it is deemed unable to pay its debts. The creditor can then petition to wind it up.
Assuming a full order book means you're solvent. Signed work is not cash. If you can't pay this month's debts, next quarter's jobs don't change the cash-flow test.
Still not sure if it's a bad month or something bigger?
Book a free call with our team. We'll go through your numbers with you and show you what to fix first.
What directors must do now
When insolvency is a possible outcome, your job changes. You must put the interests of creditors (everyone the company owes) before your own and the shareholders'.
- Ask one question before every payment and every new order: is this in the creditors' interest?
- Keep the company records up to date: accounts, confirmation statement, director's loan account.
- Write down each decision and why. Board notes protect you later.
- Get advice from a licensed insolvency practitioner before the big decisions, not after.
- If a liquidator is appointed, you must hand over records and assets and answer their questions.
The risk is real. Trading on while insolvent (wrongful trading) can make a director personally liable for the company's debts. Misconduct can lead to a ban of up to 15 years. Anything you signed a personal guarantee for is your debt anyway.
Not sure whether this is a bad month or something bigger?
Book a free call and we'll go through your numbers with you.
Your options, side by side
Insolvent does not always mean closing. If the business is viable, several routes keep it trading. This table is a summary of the official guidance. Which route fits is a decision to take with a licensed insolvency practitioner.
| Option | What it is | Keeps trading? | Who runs it |
|---|---|---|---|
| Informal deal with creditors | Agree new dates or instalments directly | Yes | You |
| HMRC Time to Pay | Instalment plan for tax debt, checked for affordability | Yes | You and HMRC |
| Moratorium | Court breathing space from creditor action, 20 business days, can be extended | Yes | You, with an insolvency practitioner as monitor |
| CVA | Pay creditors over a fixed period; needs 75% (by value) of voting creditors | Yes | You, with an insolvency practitioner supervising |
| Administration | Protection while a rescue or sale is found | Often | An administrator (insolvency practitioner) |
| Creditors' voluntary liquidation | Directors and shareholders close the insolvent company | No | A liquidator (insolvency practitioner) |
| Compulsory liquidation | The court winds the company up, often on a creditor's petition | No | Official receiver or liquidator |
Timing matters. Once a winding-up petition is filed, the company bank account is frozen. After a liquidation, directors are also barred for 5 years from using the same or a similar company name, with limited exceptions.
The next 24 hours and 7 days
In the next 24 hours:
- List every debt: suppliers, subcontractors, HMRC, loans, guarantees, with amounts and due dates.
- List what you're owed: invoices, applications, retentions, variations.
- Stop taking deposits for work you may not be able to finish.
- Call HMRC if a tax payment is about to be missed.
In the next 7 days:
- Speak to a licensed insolvency practitioner. Ask about costs before you appoint anyone. Business Debtline gives free advice.
- Hold a board meeting and minute what you decided and why.
- Collect everything you're owed, using the steps in our 7-day cash plan.
- Build a 13-week cash forecast so you and your adviser can see whether the gap closes.
If the numbers show a squeeze that closes, the cash plan and better payment terms may be enough. If they don't, you'll have acted while every option is still open.
If your company isn't going bust yet: what fixes it
Most of the construction firms we see in trouble have the same three leaks:
- Work priced too low.
- Money collected after the work instead of before.
- Tax money spent as if it were profit.
I built Craftex with no outside investors.
That means no cushion when a client pays late. What keeps a company like that alive is structure. That means deposits and stage payments before each stage, and a separate tax account. Add a reserve of overheads and five numbers checked every Friday.
If HMRC is the pressure point, read can't pay the VAT bill next. To find which leak is biggest in your business, take the free 4-minute Construction Business Scorecard.
Want to know whether your business can be turned around? Book a free strategy call.
This week's checklist
- Counted the warning signs honestly
- Ran both tests: cash flow and balance sheet
- Listed every debt and everything owed to you
- Booked advice with a licensed insolvency practitioner
- Minuted every board decision and the reason for it
