Construction Company Closures Increase... Direct Impact from Middle East War
by Lee Jungyun
Published 16 Apr.2026 08:37(KST)
Updated 16 Apr.2026 15:09(KST)
345 Construction Closures Reported in March, Up 5.5% from Previous Month
Unusual Trend as Closures Typically Decrease with Warmer Weather
Small Specialized Contractors Hit Hard
"Liquidity Support Is Needed"
Construction company closure filings, which had been on the decline earlier this year, rebounded last month. Typically, construction closures are most frequent in the winter and decrease as the weather warms, but this year the pattern changed. The overwhelming majority of closures were due to worsening business conditions, such as business abandonment and bankruptcy. There are assessments that domestic small and medium-sized construction firms have now entered the direct impact zone of the war between the United States and Iran.
According to the Construction Industry Knowledge Information System (KISCON) of the Ministry of Land, Infrastructure, and Transport on April 16, a total of 345 construction business closure filings were recorded last month. This is a 5.5% increase compared to 327 cases in the previous month. For this month, from the 1st to the 15th, 150 closure filings have been reported.
The closure filings last month represent an unusual trend compared to previous years. Due to seasonal factors, construction sites decrease in winter, leading to the highest number of closures, while the number drops from spring to autumn as temperatures rise. In January 2024, there were 417 closure filings, which fell to 298 in February and 283 in March. Last year, filings decreased from 332 in January to 291 in March. However, this year, although the number dropped from 416 in January to 327 in February, it unexpectedly increased in March.
The sudden increase in closure filings is largely attributed to the effects of the Middle East war. The combination of a construction recession and war has destabilized the supply of construction materials, prompting small construction firms to shut down their businesses entirely.
The reasons for closure filings are also overwhelmingly tied to deteriorating business performance and a slump in the construction market. The most common reason for closure last month was “business abandonment,” accounting for 88.1%. Only 2% chose closure due to company bankruptcy or poor performance. This suggests that companies are not shutting down simply because of immediate difficulties, but rather because conditions have become unsuitable for continuing business operations.
As construction company closures saw an unusual increase in March, a sense of crisis is intensifying throughout the domestic construction industry. Notably, many of the companies closing are specialized contractors responsible for specific processes. If the war prolongs, causing continued increases in material prices and further supply disruptions, a domino effect of closures may follow. Even if there is a surge in postwar construction demand, it will be difficult to respond in a timely manner.
Specialized contractors accounted for an overwhelming share of last month's closure filings. According to KISCON, of the 345 closures filed in March, 295 cases-or 85.5%-were from specialized construction firms. Under the Framework Act on the Construction Industry, specialized contractors are companies that directly contract or subcontract specific types of construction work. These include 14 designated sectors, such as interior construction, reinforced concrete, painting, waterproofing, and masonry. Generally, these firms are smaller in scale compared to general contractors, which oversee overall planning, management, and construction. The proportion of closures among these firms increased by 4.2 percentage points from the previous month.
The main causes for the wave of closures among specialized contractors are rising material prices and supply issues. With domestic crude oil supply restricted, it has become difficult to procure materials, making it impossible for firms to bear the rising construction costs. Due to unstable naphtha supply, construction materials such as paint, insulation, and admixtures (used to improve concrete quality) are now in a state of emergency regarding supply. Among last month’s closures, 42 companies (14.2%) were in the interior construction sector, which uses paint and insulation extensively.
The concerns of large construction firms about disruptions at construction sites are also impacting small specialized contractors. POSCO E&C recently notified clients about delays in the supply of key raw materials, such as ready-mix concrete admixtures, steel plates, and heavy plates, citing material supply shortages, rising construction costs, and delays. As the supply of construction materials becomes increasingly unstable, there is even talk of a possible “May shutdown” at construction sites. With major construction firms now exposed to the effects of the war, the sense of threat felt by small-scale contractors has only intensified.
An industry official said, “The smaller the company, the more likely it is to choose closure during a crisis. Because small contractors play a significant role in smaller or regional projects, if they fail, the recovery period will inevitably be prolonged.”
The war’s aftermath is also gradually worsening the economic outlook. According to a survey of housing business operators by the Housing Industry Research Institute, the Housing Business Sentiment Index for April dropped by 25.3 points from the previous month to 63.7. In March, the index fell by 6.8 points from the previous month, but this month’s figure plunged by more than 25 points due to the war’s impact.
This index uses 100 as a baseline, with values below 100 indicating that more businesses expect conditions to worsen. The effects of the war on raw material supply were also evident: the April material supply index fell by 17.0 points to 79.6. The Housing Industry Research Institute stated, “External uncertainty from the Middle East war, concerns about an economic slowdown, and rising construction costs due to higher oil prices have played a significant role.”
Experts stress that urgent support is needed, particularly for small construction firms. While public construction contracts have measures such as relaxed requirements for contract price adjustments, there are still blind spots in the private sector.
Chulhan Park, a research fellow at the Construction Industry Research Institute, said, “Due to the aftermath of the war, construction costs may increase for at least three months, which will further intensify the difficulties faced by construction firms. Small companies, in particular, have weaker bargaining power and are more vulnerable to rising costs, so measures such as providing low-interest financing or allowing contractors to receive payment for construction work one or two months in advance to support liquidity need to be prepared.”
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