Buying a Construction Business in Administration (UK)

Construction accounts for more company insolvencies than any other sector — 3,805 in England and Wales in the 12 months to June 2026. But a contractor is the hardest kind of distressed business to buy, because almost everything of value sits inside contracts that the failure itself has already terminated. A buyer's sector playbook.

Buying a construction business in administration puts you in front of more opportunities than any other sector in the UK — construction produces more company insolvencies than manufacturing, retail or hospitality — and it is also the sector where the most buyers get hurt. The reason is structural. In a factory you are buying machines; in a restaurant you are buying a site. In construction you are buying contracts, and the insolvency you're buying out of has usually already destroyed most of them.

In short: a construction company's value lives in its order book, its work in progress and its accreditations — and none of those survive an insolvency intact. Standard-form contracts give the employer a right to terminate the moment the contractor becomes insolvent, and to keep materials on site. Retentions held further up the chain become unsecured claims worth pennies. Certified work in progress is almost always overstated. What you can realistically buy is the capability — people, plant, systems, brand and relationships — plus whatever contracts individual employers agree to novate to you. Value the deal on what employers will confirm in writing, not on the order book you were shown.

Why construction leads the insolvency tables

Construction was the worst-affected industry in England and Wales in the 12 months to June 2026, with 3,805 company insolvencies — 17% of all cases where the industry was captured, ahead of wholesale and retail trade (3,463, 15%) and accommodation and food service (3,233, 14%). In June 2026 alone the sector recorded 309 insolvencies, down 4.9% on the 325 recorded in June 2025 (Insolvency Service, Company Insolvency Statistics June 2026, published 17 July 2026). The trend has softened; the absolute volume has not.

The causes repeat, and they tell you what you are inheriting: fixed-price contracts signed before a cost spike; margins in low single digits, so one bad job becomes a solvency event; payment 30 to 60 days downstream while wages and materials go out weekly; retentions locked up for years; disputed variations that sit on the balance sheet as assets and settle at a fraction. And the classic killer — a company that looks profitable because it is growing, while cash from new jobs quietly funds losses on old ones.

For a buyer, the diagnostic question is whether this was a capability failure or a contract failure. A competent regional contractor that took one catastrophic fixed-price job is a very different proposition from a business that consistently prices work it cannot deliver. The first is buyable. The second is a workforce and some vans.

The contracts problem: what the insolvency has already done

This is the single most important thing to understand before you value anything.

Standard-form construction contracts treat contractor insolvency as a termination trigger. Under the JCT suite, "Insolvent" is a defined term and the employer has a right to terminate the contractor's employment on a single notice — and the 2024 editions widened the definition to catch Part A1 moratoriums and Part 26A restructuring plans as well as the traditional processes. Crucially, JCT also gives the employer rights from the date the contractor becomes insolvent, whether or not a termination notice has been served: no further sum falls due to the contractor, and the employer may take reasonable measures to secure the site and retain materials on it. NEC and bespoke contracts follow similar logic.

Two consequences follow:

The order book on the information memorandum is not an asset you can buy. Live contracts have very likely been terminated, or can be terminated at will by each employer. You cannot take an assignment of something the counterparty is entitled to end.
Nothing more is coming from those jobs. Sums that had become due but were unpaid at the date of insolvency generally stay unpaid, and the employer's cost of completing with someone else is set off against whatever the contractor was owed. Most terminated jobs end up in deficit.

Note also which way the statutory rule runs, because it is easy to get backwards. Section 233B of the Insolvency Act 1986, inserted by the Corporate Insolvency and Governance Act 2020, stops a supplier terminating a contract because its customer has entered an insolvency procedure. In construction that constrains subcontractors and suppliers from walking away when the party above them fails — it does nothing to stop an employer or main contractor terminating when the party below them fails. So it offers no protection at all to the order book you are trying to buy.

The practical route to any live work is novation, one contract at a time, with the employer's active consent. Employers will novate where you are credible, the site is part-built and re-tendering is painful — and refuse where they were already unhappy. So the discipline is simple: before you commit to a price, get the administrator to introduce you to the largest employers and find out which of them will say yes. Every contract that only exists on paper should be valued at zero.

Work in progress: the number that decides the deal

Uncertified work in progress and unagreed variation and delay claims are where construction acquisitions go wrong. They appear as substantial assets in management accounts and they are, in the classic phrase, an opinion rather than a fact.

Test each one:

Is it certified? Certified and undisputed is real. Applied-for but uncertified is a claim, not an asset.
Has a pay less notice been served? Under the Housing Grants, Construction and Regeneration Act 1996 the payment and notice regime governs what is actually due, and a valid pay less notice can extinguish an application you were counting on.
Are variations instructed in writing? Verbal instructions and "we'll sort it at the end" are how contractors go bust in the first place.
What's the counter-claim? Liquidated damages for delay, defects and completion costs are set off before anything is paid.
Who owns the claim? Book debts and claims usually belong to the insolvent company and are collected by the administrator for creditors. If you want the debtor book, you buy it separately and price it as a discounted portfolio, not at face value — see Buying Assets From a Liquidator → for how asset schedules are typically drawn.

One point of law worth knowing: a company in insolvent liquidation retains the right to refer a dispute to adjudication, following the Supreme Court's decision in Bresco v Michael J Lonsdale (2020) — though enforcement is a separate question and courts frequently stay it where there are cross-claims. That makes adjudication a route the insolvency practitioner may use to realise claims. It rarely puts money in a buyer's pocket unless the claim has been properly assigned to you and priced as litigation risk.

Retentions, bonds and warranties

Retentions. A construction company typically has retention money held by employers on completed jobs, and holds retention from its own subcontractors. There is currently no statutory requirement for retention to be held in trust or ring-fenced, so retention owed to the insolvent company is a claim in someone else's contract, contingent on defects being made good, while retention owed by it becomes an unsecured claim in the insolvency. Treat inbound retentions as a lottery ticket, not a receivable — and expect subcontractors to arrive assuming you will honour retention you have no legal obligation to pay.

That position is changing. The Commercial Payments Bill, introduced in Parliament on 19 May 2026, would insert new sections 113A onwards into the Housing Grants, Construction and Regeneration Act 1996 to prohibit retention practices outright, subject to a two-year transition period before existing retention clauses become void. Nothing has commenced yet, so retentions remain lawful for now — but if you are modelling a construction acquisition over a three-to-five-year horizon, model it without retention income.

Bonds and guarantees. Performance bonds, advance payment bonds and parent company guarantees are usually triggered by contractor insolvency, and none of it transfers to you. What matters is whether you can obtain bonding going forward: a new acquisition vehicle with no track record will struggle, and on public and larger private work no bond means no contract. Speak to a broker before you bid, not after.

Collateral warranties and defects liability. Existing warranties were given by the old company and stay with it. Employers on part-built projects will want fresh warranties from you, on your covenant — and will often want you to take responsibility for work you did not carry out. Resist that. Define your scope by reference to a recorded condition survey at the date you take over, and price the risk that earlier work is defective.

Plant, materials and what is actually on site

Construction asset schedules flatter reality more than most. Check ownership line by line:

Plant and vehicles are frequently on hire, contract hire, lease or hire purchase, which means they go back or must be settled. Search the charges register at Companies House and cross-check the fleet list against finance agreements.
Materials on site may no longer belong to the company at all. Vesting clauses commonly transfer title to the employer on payment or delivery, and JCT expressly allows the employer to retain site materials on insolvency. Suppliers may also assert retention of title over unfixed goods.
Owned kit — welfare units, scaffolding, small plant, formwork, tooling, testing equipment — is often the most reliably valuable thing in the deal, because unlike WIP a valuer can put a defensible number on it. This is where a construction business most resembles a manufacturing acquisition →, and where asset-backed funding actually works.
The yard or depot follows normal property rules: freehold is a strong position; leasehold means the landlord, the arrears and the assignment terms decide whether there is a deal at all — the same dynamic as hospitality sites →.

Also collect the things with no book value that are expensive to rebuild: as-built drawings, BIM models, design files, health and safety files, test certificates, estimating history and supplier pricing agreements.

People, subcontractors and accreditations

Employees transfer under TUPE. A business and asset sale out of administration is a relevant transfer, so staff move across on existing terms — quantity surveyors, estimators, site managers and contracts managers are usually the real prize. The mechanics, including which liabilities the National Insurance Fund picks up in administration, are in TUPE and Employees When You Buy a Business Out of Administration →. Two sector points: attrition is brutal, because site staff are re-employed within days, which makes speed a valuation input; and genuinely self-employed subcontractors are not employees, so they do not transfer — you re-engage them, and whether they come back depends on how they were treated on the way down.

Subcontractor and supplier goodwill is the hidden liability. The people you need on your first site are the people the failed company owes money to. They are not legally your creditors and you should not casually assume old debts — but you need a deliberate policy for the top 20 subcontractors and suppliers, and should expect cash terms and reduced credit limits for months. Credit insurers withdraw cover from anything that looks like a phoenix.

Accreditations and frameworks do not transfer. Constructionline, CHAS, SafeContractor, ISO 9001/14001/45001, FORS, Gas Safe, NICEIC and sector schemes are registered to a legal entity and generally have to be applied for afresh. So do public-sector framework places and approved-supplier lists, which usually cannot be assigned without the authority's agreement — and the prequalification questionnaires will ask about the insolvency. This is often the longest lead time in the whole plan: budget months, not weeks, and start the day you complete.

CIS, VAT and the admin that stops you trading

Your new entity needs its own Construction Industry Scheme registration, and gross payment status does not transfer with a business. The acquiring company must apply in its own right and satisfy HMRC's compliance, turnover and business tests, with VAT compliance forming part of that test since April 2024. Until gross status is granted, payments to you as a subcontractor suffer deduction at source — a direct and routinely underestimated hit to working capital in your first months.

Add the VAT domestic reverse charge for construction services, which changes when VAT actually reaches your bank account, plus new insurance (contractors' all risks, professional indemnity with the right retroactive date, employers' and public liability), utility deposits and fresh trade accounts. The general framework for working through all of this is in Due Diligence on a Distressed Business →.

Building safety: the long-tail risk to take seriously

Construction carries a liability tail that other sectors do not, and it has got longer. The Building Safety Act 2022 extended the limitation period for claims under section 1 of the Defective Premises Act 1972 to 30 years where the right of action accrued before the Act commenced on 28 June 2022, and 15 years for accruals after it. It also gave the High Court power, under section 130, to make building liability orders imposing joint and several liability on companies associated with the body corporate that carries a relevant liability — where one controls the other, or a third company controls both — and those orders can be made even where the original company has been dissolved.

For a buyer, two takeaways. First, a straight business and asset purchase is the safer structure: you are not acquiring the failed company and, on the ordinary meaning of association, you would not normally be an associate of it. Second, a share purchase of a construction company with any residential or higher-risk building history should be approached with real caution and specialist advice — this is precisely the scenario the legislation was designed to reach. If the target built or clad residential blocks, that history needs to be on the table before price is discussed. On why insolvency sales are structured as asset deals in the first place, see Do Debts Transfer When You Buy a Business Out of Administration? →.

Funding a construction acquisition

Lenders are cautious on construction for the same reason buyers should be: the assets are real but the receivables are contested. Structures that work in practice:

Asset finance against owned plant, vehicles, welfare units and site accommodation — the most straightforward line, because the security is tangible and re-saleable.
Commercial mortgage where a yard or depot is freehold, or sale and leaseback to release capital at completion.
Invoice finance against certified, undisputed applications only. Funders discount construction receivables heavily or decline them outright because of set-off, retention and pay less notices, and many exclude contractual receivables altogether.
Acquisition or cash-flow finance underwritten on your plan and your track record rather than on the failed company's accounts.
Working capital headroom — the line most buyers under-size. CIS deductions before gross status, retention you cannot draw, bond collateral, insurance premiums and cash-terms suppliers all land in the same first quarter.

Two things carry disproportionate weight with a lender here: written confirmation from named employers that they will novate or award work, and a credible 13-week cash forecast. Get indicative terms in place before an opportunity appears — administrators sell to the buyer who can complete, not the one who bids highest. The full picture is in How to Fund a Distressed Business Acquisition →.

Any funding routes described here are indicative only and subject to eligibility, lender appetite and full underwriting.

A first-72-hours checklist for buying a construction business in administration

If the answer is that the contracts are gone and the people have scattered, this may be a plant and equipment purchase rather than a business acquisition — a perfectly good outcome, but a different deal and a different price. On opening the conversation properly, see How to Contact an Administrator About Buying a Business →; on why the fastest deals complete on day one, see Pre-Pack Administration Explained →.

Frequently asked questions

Can you buy a construction company out of administration? Yes, and it happens constantly — construction produces more company insolvencies than any other sector in England and Wales. In almost every case you buy the business and assets rather than the company itself, so the old company's unsecured debts stay behind. What you cannot assume is that live contracts come with it.

Do construction contracts transfer to the buyer? Generally not automatically. Standard forms such as JCT treat contractor insolvency as a termination trigger and give the employer rights over the site and materials, so contracts are commonly terminated or terminable. Live work usually has to be novated individually with each employer's consent, which is why you should confirm employer intentions before agreeing a price.

What happens to retention money? Retention held by employers on the insolvent company's completed jobs is a contingent claim that the administrator may pursue and rarely recovers in full. Retention the company was holding from its own subcontractors becomes an unsecured claim in the insolvency. There is no statutory ring-fencing of retentions in the UK.

Does the company's CIS gross payment status transfer? No. Gross payment status belongs to the registered entity. Your acquiring company must register for CIS and apply in its own right, meeting HMRC's compliance, turnover and business tests. Plan for deductions at source in the meantime — the working capital effect is significant.

Do the employees transfer? Employees transfer under TUPE on their existing terms. Genuinely self-employed subcontractors do not — you re-engage them, and whether they return depends on how they were treated before the failure. Move fast: site staff find other work within days.

Is it safer to buy the shares or the business and assets? For construction, business and assets is usually far safer. As well as leaving the debts behind, it avoids acquiring a company that carries building safety liabilities — a live issue given the extended limitation periods and the courts' power to make building liability orders against associated companies. Take specialist advice before considering a share purchase of any contractor with residential or higher-risk building history.

This article is general information, not legal, financial, investment, insolvency or tax advice. Construction contract, insolvency and building safety law is technical and fact-specific — always carry out your own due diligence and take advice from a construction solicitor before acting on any opportunity.

Any funding routes described are indicative only. Availability, terms and pricing depend on eligibility, lender appetite and full underwriting, and nothing here is a recommendation or an offer of finance.

Insolvency figures cited: Insolvency Service, Commentary — Company Insolvency Statistics June 2026, published 17 July 2026. Industry figures cover England and Wales, exclude non-trading and dormant companies and cases where industry was not captured, and are provisional and subject to revision.

Social companions (do not publish to CMS)

LinkedIn post 1 — the order book that isn't there

The most common mistake in buying a construction business out of administration:

Paying for the order book.

Here's why it's a mistake. Standard construction contracts — JCT, NEC, most bespoke forms — treat contractor insolvency as a termination trigger. The employer can end the contractor's employment on a single notice. And under JCT the employer gets rights from the moment the contractor becomes insolvent, whether or not that notice has been served: no further sums fall due, and the employer can secure the site and keep the materials on it.

So the £14m of "live projects" in the information memorandum isn't an asset anyone can sell you. Those contracts are terminated, or terminable at will by the other side.

The only route to live work is novation — one contract at a time, with each employer actively agreeing to it.

Which gives you a very simple discipline before you bid:

Ask the administrator to introduce you to the five biggest employers. Find out who will novate and on what terms. Value everything else at zero.

Employers novate when you're credible, the site is half-built, and re-tendering is painful. They refuse when they were already unhappy with the contractor. You need to know which you're dealing with before you fix a price, not after.

Construction is the largest insolvency sector in England and Wales — 3,805 company insolvencies in the 12 months to June 2026, per the Insolvency Service. The opportunities are real. The order book usually isn't.

Full sector playbook: distresseddealflow.co.uk

#construction #distressedMA #insolvency

LinkedIn post 2 — the working capital nobody models

You've bought a contractor out of administration. Good people, good plant, three employers have novated. Now the cash.

Four things land in your first quarter that rarely appear in anyone's model.

CIS. Gross payment status doesn't transfer with the business. Your new company has to register and apply in its own right, and pass HMRC's compliance, turnover and business tests. Until it's granted, payments to you get deducted at source. That's a direct hit to cash flow, every application, for months.

Bonds. Performance bonds get called on insolvency and none of them come to you. The question is whether your new entity can obtain bonding at all — because on public work and most larger private work, no bond means no contract. Talk to a broker before you bid.

Retentions. Money held by employers on the old company's finished jobs is a contingent claim that rarely gets recovered. Money the old company held from subcontractors is an unsecured claim in the insolvency. There's still no statutory ring-fencing — and the Commercial Payments Bill, introduced in May 2026, would ban retention practices outright after a transition period. If you're modelling this business over five years, model it without retention income.

Suppliers. The people you need on site next week are the people who just lost money. You don't owe them legally. You will still need a deliberate policy — and you should expect cash terms and withdrawn credit insurance for a while.

None of this makes construction a bad buy. It makes it a sector where the working capital line, not the purchase price, decides whether the deal works.

Playbook on the site: distresseddealflow.co.uk

#construction #acquisitions #cashflow

Short-form video script — "The order book that isn't for sale" (Article 17)

HOOK: Construction has more insolvencies than any other sector in the country. It's also the easiest place to overpay — because the main thing you think you're buying doesn't exist.

BODY: The order book. Every distressed contractor comes with a list of live projects and a big number next to it. Here's the problem. Construction contracts treat insolvency as a termination trigger. The employer can end the contractor's employment on one notice — and under JCT, the moment the contractor goes insolvent, no more money falls due and the employer can hold the site and the materials on it. So those contracts aren't yours to buy. The only way you get live work is novation: each employer choosing to take you on instead. Before you bid, ask the administrator to introduce you to the biggest employers and find out who'll say yes. Then value the rest at zero. What you can actually buy is real: the estimators, the site managers, the plant, the systems, the brand. Just don't pay twice — once for the capability, and again for an order book that's already gone.

CTA: Full construction playbook — link in bio. Distressed Deal Flow.

Buying a Construction Business in Administration: A Buyer's Sector Playbook