When a subcontractor goes under
By the time the news arrives, every decision that matters has already been made: what was paid for, what was on site, and whether anybody knew it was coming.
QScope Team · 18 June 2026 · 5 min read
A subcontractor entering administration or liquidation partway through a package creates several problems at once, and the useful ones to have thought about in advance are payment, materials, retention and completion.
Payment
The pay-when-paid prohibition in the Construction Act has one express exception: where the third party in the payment chain is insolvent. So a main contractor whose employer has become insolvent can, if the subcontract so provides, rely on a pay-when-paid clause downstream.
Going the other way, where it is the subcontractor that is insolvent, the ordinary rules still apply to sums already notified. Amounts properly due before the insolvency remain due, subject to any valid set-off, and set-off still requires a valid notice.
Materials
This is where the earlier decisions come home. Materials paid for but not delivered are recoverable only if title actually passed and they can be identified. That is what the off-site materials conditions were always for.
Where a subcontractor was paid for fabricated goods sitting in a yard, and the goods were never vested, set apart or marked, the practical outcome is usually that they are gone. The administrator sells the assets, and an unmarked stack of steel is an asset of the company.
Retention
Retention held from an insolvent subcontractor is a debt owed to the company, and the administrator will ask for it. Whether it can be released depends on what it secures: outstanding defects, incomplete work, and the cost of completing.
Where retention is held in trust in a separate account, which some subcontracts require, the position differs from where it is simply a book entry. It is worth knowing which arrangement is in place before it matters.
Completing the work
The subcontract will usually allow termination on insolvency, and the main contractor then completes the work by other means and accounts for the cost.
The completion cost typically exceeds what remained payable, because a replacement subcontractor prices a part-finished job of unknown quality with no continuity. That difference is a claim against the insolvent company, and in most administrations it recovers very little.
The warning signs
Slower attendance, thinner labour, requests to bring payments forward, suppliers calling the main contractor about unpaid invoices, disproportionate interest in a payment that was never previously chased.
None of these individually means much. Together they usually mean something, and the response is to tighten verification of materials and check that nothing is being paid for that is not physically on site and identifiable.
Before it happens
Keep the package position current: what has been certified, what retention is held, what materials have been paid for and where they are. If that takes a week to assemble, the week is the problem.
QScope keeps subcontract valuations, retention and materials in one place per package, so the position on the day is a report rather than an investigation.