Client Insolvency: The Hidden Margin Killer in UK Construction

Specialist engineering contractor McGee has reported a £2.8m pre-tax loss for the year to November 2025, after a £3.6m bad debt from the insolvency of a client on a major London hotel job. Turnover fell 11% to £134m from £151m, reversing a £5.3m profit the year before, according to Construction Enquirer. Separately, developer SevenCapital has had to take direct control of the £500m 100 Kensington tower job after main contractor Ardmore went into administration, restarting work through its own group company.

Both stories point to the same risk: your P&L can be destroyed by someone else's insolvency, not your own performance. If you're a subcontractor or specialist trade relying on one large client or main contractor for a significant chunk of turnover, a single collapse in that chain can turn a good year into a loss overnight.

The worked example

Take a groundworks firm turning over £5m a year, with one client accounting for £1m of that through a single large job. If that client goes under owing 60% of the contract value in unpaid invoices and retentions, that's £600,000 gone. On a typical 8% net margin, this firm would need to generate an extra £7.5m of fully profitable turnover just to recover that loss in cash terms. Most SMEs can't absorb that kind of hit without laying off staff, delaying supplier payments, or drawing down every credit line they have.

This isn't a rare event. Insolvencies in construction have been running high for several years, and the chain reaction from one collapse often takes out subcontractors two or three tiers down who had no direct visibility of the risk. Retentions held on account make this worse: money you've earned but not been paid, sitting exposed until practical completion or beyond.

What to do this month

• Run a credit check on every client and main contractor before signing new work, not just at tender stage.
• Cap your exposure to any single client at a fixed percentage of turnover, and track it monthly.
• Push for shorter payment terms and stage payments tied to milestones, not just monthly valuations.
• Chase retentions actively rather than waiting for them to be released voluntarily.
• Consider trade credit insurance on your largest contracts if you don't already have it.

None of this requires new technology or a big spend. It requires discipline around who you take on as a client and how tightly you monitor exposure. The businesses that survive the next wave of construction insolvencies won't be the ones with the best sites. They'll be the ones who saw the risk coming and priced for it.