How frameworks can help when suppliers go bust

Partner content14.04.26by Liam Gratty

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Liam Gratty, director of strategic services at the Communities and Housing Investment Consortium (CHIC), offers a perspective on how frameworks can help when construction businesses enter into insolvency

The construction market still records the highest number of company insolvencies of any sector, writes Liam Gratty, director of strategic services at CHIC

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Liam Gratty, director of strategic services at the Communities and Housing Investment Consortium, offers a perspective on how frameworks can help when construction businesses enter into insolvency #UKhousing

The UK construction sector remains one of the most dynamic yet financially vulnerable parts of the economy. While overall output has nudged ahead modestly, underlying distress continues to surface in company failures, especially among suppliers involved in housing development and maintenance.

The construction market still records the highest number of company insolvencies of any sector, a trend accelerating over the last few years as economic pressures mount.

The fall of major players among some of the UK’s biggest contractors and suppliers has sent shockwaves through the industry, sparking thousands of job losses and threatening public sector project pipelines.

Impacts on SMEs

Smaller subcontractors and specialist trades face the risk of cashflow pressures, often triggered by late payments and tight margins. Compounding these trends are cost pressures such as materials cost, labour shortages and rising regulatory compliance burdens. These factors put pressure on profitability and increase risk exposure.

Social housing sector

The UK is grappling with a continued social housing crisis, high demand, limited supply and rising cost pressures.

This funding supported social housing providers to deliver their affordable warm homes programmes, while they were also facing cost pressures around compliance and rising maintenance obligations. When suppliers delivering social housing programmes face insolvency, it risks delaying or derailing critical projects, reducing delivery capacity at a time when need is acute.

Procurement risks

Quite rightly in the public procurement space, especially for housing associations, councils and government agencies, procurement activity will be increasingly shaped by a level of risk aversion. Insolvencies disrupt delivery and can expose our members to cost overruns, re-procurement delays, legal disputes and, importantly, impact the services that residents rely on the most.

Contract risks

The failure of a major supplier often ripples through subcontractors and sub-suppliers, which undoubtedly exacerbates delivery risk across a project’s supply chain. This can result in slower payment cycles from larger suppliers to smaller subcontractors, which in turn may result in cash constraints and heightened insolvency risk.

Frameworks won’t stop failure, but they will stop chaos!

To build resilience and reduce downstream risk, CHIC is here to support members throughout the end-to-end process of a procurement exercise.

Compliant routes to market, established by CHIC, provide pre-qualified frameworks that allow housing providers to engage contractors, consultants and suppliers that have undertaken procurement assessments, reducing contract lead-in times and risk. The CHIC service includes:

Financial viability assessments, looking at credit history, working capital and risk signals
Performance, competence and quality assessment (including social value outcomes)
The promotion of fair and prompt payment terms that should cascade provisions in subcontract chains, helping protect smaller suppliers’ cashflow
Structured framework contracts to utilise annual price adjustment clauses and continued supply chain dialogue to mitigate or, as far as possible, foresee unexpected cost swings
Dedicated partnership teams to support and manage supply chain relationships and provide a key source of market intelligence

Managing supplier failure

No matter how robust the due diligence, monitoring and contractual safeguards a framework provider puts in place, it is not possible to fully eliminate the risk of supplier insolvency in a volatile economic environment.

What can be controlled, however, is the response and, critically, the overall impact on residents. By leveraging established relationships across a wider, pre-vetted supply chain and using compliant alternative routes to market, framework providers can act quickly to source and negotiate replacement suppliers.

This approach helps maintain continuity of service, protects residents from disruption and supports the integrity of the ‘golden thread’ by ensuring that accountability, product information and safety data remain intact throughout any supplier transition.

From reactive to ready

The economic pressures that have driven insolvencies will not disappear overnight. However, public procurement reform can strengthen risk management, reduce supply chain fragility and enhance delivery confidence.

A more diversified contracting market and improved payment practices can help protect SMEs, which are often considered the backbone of housing and asset management delivery.

Supporting initiatives that align long-term delivery incentives between suppliers and consortium members can reduce trends of spot-buying and short-term bidding, and bolster long-term, efficient working relationships.

Ultimately, shifting from reactive problem-solving to proactive resilience, delivered through risk assessment, financial oversight and an ethos of collaborative procurement, can help stabilise the sector while continuing to address the needs of CHIC members delivering services to their residents.

Liam Gratty, director of strategic services, Communities and Housing Investment Consortium