Construction Company Closures Hit Worst Level in 19 Years

276 General Construction Company Closures Reported from January to May
36 More than Last Year... 2023 Marked the Highest Number of Closures Since 2005

The number of closure reports filed by general construction companies surged between January and May of this year. The figure has far surpassed last year's level, which was previously considered the worst on record. As more companies shut down, the number of employed workers has also dropped significantly.

According to the Construction Industry Knowledge Information System (KISCON) of the Ministry of Land, Infrastructure and Transport on June 15, the number of closure reports filed by general construction companies from January to May this year totaled 276. This is 36 more than during the same period last year. In 2024, the total number of closure reports for general construction companies reached 641, the highest since the survey began in 2005, when there were 629 cases. Given that the number of closure reports in just the first five months of this year already exceeds last year’s pace, there is a strong possibility that a new record high will be set.

The increase in closures among general construction companies is largely due to a reduction in construction orders caused by rising construction costs. High interest rates, a contraction in real estate project financing (PF), and a glut of unsold homes in regional areas have also contributed to the decline in available work. General construction companies are responsible for overall planning, management, and execution, rather than specializing in a single field. Because they are awarded contracts for entire facilities, a decrease in available work has a significant impact on them.

A direct review of the closure reports filed between January and May shows that the main reason for closure was business abandonment, accounting for 227 cases, or 82% of the total. When adding company bankruptcy (7 cases) and business deterioration (5 cases), the proportion of construction companies closing due to the economic downturn reaches 86%. While it might be expected that companies would scale down from general construction to specialized construction in specific fields when market conditions are poor, the economic climate has become so frigid that most companies are choosing to exit the business entirely.

The closure of general construction companies has also led to a decrease in employment within the construction industry. According to the "May 2025 Employment Trends" report released by Statistics Korea, the number of people employed in the construction sector fell by 106,000, the second largest decrease after agriculture, forestry, and fisheries, which saw a decline of 135,000. In March, the number of construction workers dropped by 185,000, marking the largest decline since the 2013 revision of the 11th industrial classification. Notably, the number of construction workers has decreased for 13 consecutive months as of last month, setting a new record for the longest period of decline.

Experts advise that the government's role is crucial in resolving the construction industry downturn. Park Cheolhan, a research fellow at the Korea Institute of Construction Industry, stated, "Both public and private sector construction orders have declined due to heightened uncertainty stemming from political instability and the administration of U.S. President Trump, as well as rising construction costs." He added, "We assess the current situation as a crisis on par with the IMF crisis or the global financial crisis."

He went on to say, "It would be desirable for the government to take active steps to support the industry in the second half of this year," emphasizing, "The government should play a priming role by generating public projects, initiating actual construction, and creating jobs."