Merit Group, a modular building specialist and North East Company of the Year, entered administration with 300 jobs gone. The financial indicators weren’t subtle. Pre-tax profit plunged 72% from £8.4 million to £2.3 million in twelve months. Turnover dropped from £88.4 million to £79.7 million.
Management called the future “tremendously exciting” in their audited accounts.
Merit didn’t fail because of bad leadership alone. They failed because the entire construction sector operates on a knife edge.
The numbers tell the story. Construction represents only 6-7% of UK’s gross value added. But it accounts for 17% of all insolvencies. Why? Profit margins sit at 2-4%, and fixed-price contracts mean companies can’t pass unexpected costs to customers.
Merit faced three winding-up petitions. The final one from HMRC killed their new business opportunities. This mirrors a broader trend: HMRC winding-up petitions surged from 630 in Q3 2024 to 1,069 in Q1 2025, with construction companies facing more petitions than any other sector.
The administrators pointed to rising costs, high interest rates, and subdued private sector demand.
Companies operate on razor-thin margins while facing payment delays, cost pressures, and aggressive enforcement. One major contract delay or client dispute creates a cash flow crisis. That crisis triggers enforcement, which destroys new business opportunities and accelerates the path to collapse.
Award-winning companies with decades of experience aren’t immune. The structural vulnerabilities exist everywhere in construction.
How many other construction companies are operating one petition away from administration? The sector’s disproportionate insolvency rate suggests Merit won’t be the last casualty.
Northumbria Healthcare NHS Foundation Trust implemented contingency plans for the Berwick Community Hospital project. Work continues, but without certainty about completion timelines. The 300 former Merit employees file claims with the Redundancy Payments Service.