The warning comes from accountant Price Bailey after analysing data from lender the British Business Bank following a Freedom of Information Act request.

The Coronavirus Business Interruption Loan Scheme (CBILS) was closed for new applications on 31 March 2021, and businesses were given a 12-month grace period before having to start making repayments, meaning that a large proportion of borrowers have only just started making repayments on loans of up to £5m over six years.

But the data shows that of the 97,000 business awarded loans more than 2,000 have already defaulted on repayments in the first few months.

The default rate in construction is 2.5% – more than twice the default rate of some other sectors, such as arts and entertainment (1.3%) and healthcare (0.8%).

Price Bailey estimates the amount defaulted so far across all industries to be approximately £350m.

Chand Chudasama, Partner at Price Bailey, said: “Despite being in the early stages of repayment a rapidly growing number of CBILS borrowers are already defaulting on their loans due to the phasing out of Covid support measures and a worsening economic outlook.

“Businesses are being squeezed from multiple angles. Costs are rising and demand is weakening while repayments on Covid support loans are falling due.

“Defaults on CBILS are an early warning of likely insolvencies to come. In many cases it could be several months before businesses which have defaulted on CBILS repayments face debt recovery action from creditors.

“The surging level of CBILS defaults in the construction industry suggest that we are likely to see a high level of business failures for many months to come.

“Construction businesses are contending with both shortages of materials and labour and rising costs. Supply chain disruptions are making it harder for businesses to finish jobs to schedule and avoid financial penalties for late completion.”