Subcontractor insolvency risk: read your own data first

The accounts a subcontractor filed at Companies House tell you very little about whether it will still be trading when your package is half built. The better early warning sits in records you already hold: how a firm prices, how it applies for payment, whether its insurance and PQQ are current, and how much of its turnover your job represents. Construction is still top of the insolvency table, and a government proposal could take the audit away from many medium-sized firms. That makes this a good month to pull those signals into one place.

What the latest insolvency figures show

The Insolvency Service published its September 2026 company insolvency statistics on 20 October. Construction recorded 3,873 insolvencies in England and Wales in the 12 months to September, 17% of cases where an industry was captured and the highest of any sector. That was 2% lower than the previous 12 months.

The detail is more useful than the headline. Construction News's analysis of the same release found that over the first nine months of 2026, insolvencies among specialist contractors fell 7%, from 1,699 to 1,587. Companies building residential and non-residential buildings went the other way, up 7% from 615 to 657. Road and rail construction insolvencies rose 55%, from 29 to 45, already past the 40 recorded across the whole of 2025.

RSM UK's commentary noted that specialist construction activities still made up 59% of construction insolvencies in September (168 of 285), their highest proportion for over a year. James Hawksworth of RSM pointed to winding up petition data showing one in four petitions issued by trade creditors in the UK are in construction, and said cash-flow pressure "remains firmly embedded across the sector, particularly within the supply chain". Kelly Boorman, RSM's head of construction, expects a significant rise in October as the seasonal summer dip ends.

The risk has moved rather than eased, and some of it now sits at the building contractor tier.

The published accounts may soon tell you even less

Running alongside this is the Department for Business and Trade's consultation on modernising corporate reporting, open until 30 November 2026. One proposal would extend the statutory audit exemption to medium-sized companies, broadly those within two of three limits: turnover up to £54m, total assets up to £27m and no more than 250 employees on average. Qualifying medium-sized companies would also be spared a cashflow statement.

Construction News quoted Mark Cunningham of Blick Rothenberg, who said main contractors, lenders and insurers often rely on audited statements when assessing construction businesses, and that removing that assurance "could lead to increased scrutiny, delays and friction". Rob Driscoll of the Electrical Contractors' Association made the fair counterpoint that audit results may still be needed at pre-qualification or under contract to prove probity. Cunningham also expects implementation to be "several years away".

My view is that the audit debate matters less to package risk than it looks. Plenty of the firms we appoint for drylining or groundworks are small enough to be exempt from audit already. Even a full audited set describes the business at a year end that has often long passed by the time a procurement team reads it. It was always a snapshot, never an early warning.

Where the real early warning sits

Firms in trouble usually show it in their dealings with you before it reaches a filing. No single signal proves anything, but several together on one package deserve a conversation.

• Pricing. A return well below the rest of the field on a labour-heavy package is worth a clarification meeting before it is worth a celebration. So is a regular tenderer that suddenly stops returning prices.

• Payment applications. Requests to move the application date, pressure for payment outside the cycle, materials on site that the site team cannot find, or unagreed variations appearing in the gross valuation.

• Site resource. Gang sizes dropping against the programme, supervisors changing, or the site team hearing that the firm's own suppliers have moved it to pro forma.

• Paperwork. Insurance renewals arriving late or not at all, PQQ refreshes ignored, and slower answers to RFIs and submittal comments.

• Dependency. How much of the firm's turnover your package represents, and how many of your other jobs it is working on.

Dependency is the signal most teams never write down, and it turns one insolvency into a problem across several sites.

Worked example: a dependency check at award

This is illustrative, not a real case. A drylining subcontractor turns over around £6m a year and its last accounts look fine. You are about to award it a £2.4m package on a residential block, and it already holds £1.1m of work on two of your other sites.

That is £3.5m of your work against £6m of turnover, close to 60% of the business tied to one main contractor. If it loses a dispute elsewhere or a client of its own pays late, your three sites feel it together. The answer is not automatically to walk away. It is to decide with your eyes open: tighter valuation and certification discipline, no payment for off-site materials without vesting documentation and whatever security the contract requires, an agreed second-placed tenderer kept warm from the tender return, and a monthly review of that firm's applications rather than a quarterly one.

A package financial health checklist

Run this at award and then at each valuation for your critical packages:

1. Insurance certificates current, with expiry dates logged against the firm, not buried in an email.

2. PQQ refreshed within your own policy period, including the financial section.

3. Tender return compared with the field, with any outlier clarified in writing.

4. Value of all live packages with the firm across your business, as a share of its turnover.

5. Payment applications on the agreed cycle, with gross valuations matched to work actually installed.

6. Variations instructed and numbered before they appear in an application.

7. Payment notices and any pay less notices issued on time, so the firm's cash position reflects agreed figures.

8. Site manager's view on resource and supervision recorded at each valuation.

9. A named fallback firm for the package if the current one fails.

Point seven cuts both ways. Paying late or arguing every valuation is one of the faster ways to push a marginal subcontractor over, so paying the right amount on time is part of managing this risk.

Getting it out of five different places

The reason most teams miss these signals is that they are scattered. Insurance sits in someone's inbox, the PQQ in a spreadsheet updated at onboarding, payment history in the accounts system, and the site view in the project manager's head. Nobody sees them side by side until the administrator writes.

Holding them against one subcontractor record fixes most of that. In SubTrada, the subcontractor directory profile carries the PQQ tiers and live insurance expiry, tender returns land in the procurement tracker where they can be compared with the field, and variations get an instruction number before they reach the valuation schedule. None of that predicts insolvency, but it puts the evidence in one view while there is still time to act on it.

For developers and client teams

The rise in building contractor insolvencies means your exposure is not only to the trades. Ask your main contractor which packages it treats as critical and who the fallback firms are. A contractor that answers quickly usually has its supply chain in hand, and package-by-package visibility of procurement makes that conversation easier than waiting for the monthly report.

FAQs

Are audited accounts still worth asking for at PQQ?

Yes, where a firm has them, as independent evidence of a past position. Do not treat them as a forecast, and expect fewer medium-sized firms to have them if the exemption is extended.

Which construction firms are failing most often in 2026?

Specialist contractors still account for the most cases, 59% of construction insolvencies in September according to RSM UK. Over the first nine months, the sharper rises were among building contractors (up 7%) and road and rail contractors (up 55%), per Construction News's reading of the Insolvency Service data.

What should a main contractor do when a subcontractor shows warning signs?

Talk to the firm early, check the valuation position against work installed, stop paying ahead of progress and line up a fallback. Withholding money without a valid pay less notice usually makes things worse and puts you in breach.

When does the corporate reporting consultation close?

At 11:59pm on 30 November 2026. Creditors, including main contractors, can respond.

Next step

Pick your five most critical live packages this week and run the dependency check on each. If your share of their turnover is a guess, that is the first gap to close, and it costs an hour with the commercial team.