One Builder Down, Everyone Exposed

When a head contractor goes under mid-project, the damage doesn't stay contained to that one company. A client or developer is left finding a replacement builder under pressure, often at a higher price, while the project sits stalled. Subcontractors who've done work and haven't been paid are left as unsecured creditors, usually near the back of the queue behind secured lenders, employees, and Inland Revenue. Retentions that should have been protected can get tied up in the liquidation process for months. And everyone attached to the site, material suppliers, other trades, even neighbouring projects sharing the same subcontractor pool, can feel the ripple even without a direct contract with the failed builder.

The industry itself has started saying this out loud. In August, the Combined Building Supplies Cooperative called for reform, with chief executive Carl Taylor saying members are carrying risk the system was never designed to allocate properly. The Building Officials Institute separately noted inspection failure rates sitting between 45 and 55 percent, which gives some sense of how much rework and delay is already baked into the system before a liquidation even happens.

What to actually do about it

• Treat due diligence as ongoing, not a one off check at tender stage. A builder's financial position can shift significantly over the life of a project. Checking in on cash flow health, payment patterns, and tax compliance partway through a job is worth the discomfort.

• Don't assume a busy site means a healthy business. Liquidators are repeatedly finding governance and financial management failures inside firms that looked fine from the outside right up until they weren't.

• Push for staged payments and genuine retentions protection, not just on paper. If you're a subcontractor, know where your retentions actually sit and whether they're genuinely ring fenced.

• Build contingency into your own contracts and pricing, whether you're a head contractor relying on subcontractors or a subcontractor relying on a head contractor's solvency. Assume at some point in your career, a party you're relying on won't make it to practical completion, because the numbers say that's no longer a tail risk.

• Know your position as a creditor before you need to. Understanding where you'd sit if a counterparty failed tomorrow, secured, preferential, or unsecured, changes how much risk you're actually willing to carry on a given job.