The number of construction firms in significant distress has jumped by 14 per cent in the past year, according to figures from Begbies Traynor.
The insolvency specialists latest Red Flag report notes that 102,285 construction businesses faced significant distress at the end of the second quarter (Q2) this year, compared with 89,824 in the equivalent period last year.
The number of construction firms in critical financial distress also reached 6,999, up from 6,043 in Q2 last year.
Other recent industry data has revealed equally negative indicators. The use of subcontractors is at a five-year low, according to the S&P Global UK Construction Purchasing Managers Index (PMI) in June.
Last months PMI data also showed optimism among contractors had hit a two-and-a-half-year low after a fall in workloads and amid fragile client confidence.
The biggest jump in firms suffering significant distress, according to Begbies Traynor, was among those offering plumbing, heating and air-conditioning installation. The number of companies in this sector facing financial problems rose by 23 per cent year on year to 7,282.
Electricians and finishers of projects also saw a large hike in numbers citing significant distress.
The sector as a whole is expressing a little more caution in the face of the heightened level of uncertainty both at a global and domestic level, said Michael Ward, head of property at MAF Finance Group, part of Begbies Traynor Group.
Richard West, chief executive of analytics firm Red Flag Alert, added: The construction sector continues to face sustained pressure, with insolvencies remaining at elevated levels due to rising material costs and labour shortages, but also from delayed payments in a fragmented market.
However, this isnt just about the cost of materials or slow cashflow theres an array of difficult challenges globally that are having a knock-on effect.
Ward said that while there is distress in the sector, there is also promise.
The figures showed a drop in financial distress among firms involved in civil projects and commercial development schemes.
Seeing that infrastructure and commercial builders are reducing in distress reflects the thought that public sector work and the return to office is starting to produce workstreams and revenue, Ward said.
Last month the government unveiled a 10-year infrastructure strategy, which it is hoped will further boost the pipeline of work. At the same time, housing is a big focus of the government, with a promise of �39bn for affordable housing over the next 10 years.
Independent analyst Stephen Rawlinson said the latest figures were entirely believable and that a two-tier market had emerged.
One of these markets consists of the big PLC construction firms, which are benefiting from public contracts, such as HS2 infrastructure, and the regulated sectors, he explained.
The water companies, the power companies, particularly National Grid, are increasing investment into the sector and much of thats going to the quoted firms, Rawlinson said.
At the same time, he suggested smaller businesses were more likely to be facing struggles, adding: Small companies focused on commercial and residential [jobs] might be in greater danger than others.
Tax changes are also likely to be affecting smaller enterprises, such as hikes to employer national insurance contributions and the minimum wage, Rawlinson said.
