Quarterly administrations break the 100 barrier

The Buckingham Group was the most prominent victim in September as business failures rose 40% year-on-year.

The three months from July to September had 101 administrations of construction companies, a record quarterly total since then Construction news began publishing monthly Creditsafe data in January 2020.

September’s total of 28 business failures was a 40% increase compared to the same month last year, when 20 businesses went under. And year-to-date administrations (275) are up 54 percent from the first nine months of 2022.

Buckingham Group was the most high-profile failure among administrations recorded during the month, resulting in around 500 redundancies despite the sale of its rail engineering business to Kier. Grant Thornton administrators claimed that “inflationary pressures” caused significant losses on key contracts.

Major ongoing projects for the £665m contractor included Liverpool FC’s Anfield stadium stands and Fulham FC’s Craven Cottage. Buckingham collapsed with £108m owed to creditors, and Grant Thornton received 1,258 claims by the end of September.

A further seven companies on September’s list were large enough to have to submit turnover data to Companies House.

Following the collapse of foundation services provider Allma Construction in August, its parent company Allma Holdings Ltd followed suit in early September with FRP Advisory taking over the affairs of the two Scottish companies.

South of the border, Westridge Construction, based in Sussex, had a portfolio of residential, commercial and leisure projects in the south east of England. However, the £64m turnover company could not cope with inflationary pressures and called in administrators from Crowe UK at the end of September.

Crowe UK noted “numerous commercial headwinds” for Westridge, including the knock-on effects of supply chain insolvencies, inflation, labor and material availability and “escalating insurance premiums professional indemnity insurance”.

Facade contractor M Price posted a turnover of £29.03m in its most recent accounts for the year ending 30 April 2021, but posted its first loss (1.23 million pounds sterling) in 27 years, citing Brexit and the Covid pandemic as the main causes. On 26 April this year, M Price failed to file the new accounts and called the administrators of Begbies Traynor and Seneca IP on 8 September.

common thread

Some of the businesses that went down in September went online, including Bradford-based Mitton Mechanical Services, Mitton Electrical Services and Mitton Aftercare. These three companies had a combined turnover of £33.8m in their most recent accounts for the year ending 27 January 2022.

Micro-enterprises Maya Geneco and Smartway Entrepreneurs are listed at Companies House with the same director (Mohatem Kader). Along with Kader, Belal Zuaiter is listed as a “person with significant control” over the London-based companies.

Lancashire-based Soho JV2 and Soho JV3 only incorporated last February and neither company had filed accounts before calling in administrators. Parent company Soho Paper JV Holdings remains in business.

Two of the companies on the September list closed the month under new ownership by related companies. Telecoms infrastructure specialist Gresham Land and Estates was sold to Gresham Communications for £200,000 and Hytech Glass was bought by Hytech Glass Liverpool Ltd for £75,000.

Despite this good news, the outlook for the rest of the year looks bleak. Mechanical and electrical contractor Michael J Lonsdale (77th in the CN100 2023) collapsed on 2 October, with Begbies Traynor appointed to sell the company’s assets in a bid to recover money for creditors.

And despite Prime Minister Rishi Sunak’s pledge to invest £36 billion in improving transport infrastructure in the north, alarm bells will be ringing in the contractor community following his announcement on October 4 that the government is canceling wash the second phase of the HS2 rail project. .

“Today’s decision removes a huge amount of work for the construction industry and will be a source of disappointment and uncertainty for many businesses who were preparing for the second phase of HS2,” said Tim Seal, head of construction of the Ridgemont Law Firm. “This is especially the case for companies that have already obtained contracts for the second phase.”

Crowe’s head of recovery solutions in the UK, Vince Green, said continued high inflation was continuing to squeeze margins across the construction industry, particularly for contractors operating on fixed price contracts.

“We’ve seen several recent situations where core projects have become onerous for the companies involved,” he said. “The Bank of England’s relatively high base rate, which has risen by four percentage points over the past 12 months, is also leading to a higher cost of borrowing and therefore further reducing the profitability and liquidity available to to companies

“Furthermore, the shock waves of the recent largest insolvencies in the industry have not yet fully rippled through the industry and we may see more near-term failures of subcontractors that have substantial exposure.”

Mani Singh, senior account director at Tryg Garanti, described a “very challenging” business climate for construction companies in the fourth quarter of this year and beyond.

Noting that Buckingham and Michael J Lonsdale were employee-owned trusts (EOTs), he added: “It’s starting to create a picture where there are a lot of people in the bond market who will say, ‘actually, I’m not sure I want to.’ to support this [kind of] firm’ And it’s a shame, because there will be some very good ones [EOT] companies that haven’t really done anything wrong.”