Inland’s demise dominates October’s business failures

Newly released data from Creditsafe shows building administrations almost doubled year-on-year in October, with 37 failures compared to 19 the previous year.

And the year-to-date total of 312 marks a 58% increase compared to the first 10 months of 2022.

Eleven companies were large enough to submit turnover figures to Companies House, while 10 employed two or fewer workers.

A major factor behind the October total was the demise of Inland Homes plc and nine associated AIM-listed companies. The builder called in the administrators of FRP Advisory as uncertainty related to regulatory compliance meant it was unable to publish audited accounts for the past two financial years.

Work on the £90m Patchworks high-rise scheme in Walthamstow was subsequently halted.

Inland Homes’ most recent accounts, covering the year ending 30 September 2021, showed a turnover of £181.7m with a pre-tax profit of £13.2m , with a margin of 7.3 percent. The company employed a monthly average of 143 workers during the year.

Its subsidiary Inland Ltd is also included in the October list. In its most recent accounts to 30 September 2021, turnover more than doubled to £83.3m, generating a pre-tax profit of £15.7m.

Inland Partnerships Ltd (another subsidiary) reported turnover of £68.1m for the year ending 30 September 2021 compared to £54m the previous year. The company was able to narrow its pre-tax loss slightly from £1.5m to £1.3m.

FRP Advisory handles the affairs of these and other Inland majority-owned companies. These include: Appletree Farm Cressing; Aston Clinton Developments; Brook Street Properties; Bucks Developments; Interior (STB); and Thames Homes. Inland also held a minority stake in Cheshunt Lakeside Developments.

October was also notable for the collapse of major mechanical and electrical (M&E) specialist Michael J Lonsdale. The administrators of Begbies Traynor are trying to sell the company’s assets to recover money for creditors.

Wellingborough-based subsidiary MJL Midlands (formerly E7 Building Services) also went under, just over a year after its takeover.

Michael J Lonsdale’s ongoing projects included the University of London’s Queen Square Institute of Neurology, due for completion in July 2024.

The company had a turnover of £191m in the 12 months to 30 September 2022, with a profit of £2.5m, down slightly from £2.7m the previous year.

Marc Hanson, partner in the construction group at law firm Mishcon de Reya, warned: “In the short term, MJL’s [Michael J Lonsdale’s] Insolvency will likely drive inflation for M&E work and drive increasingly risk-averse behavior by prime contractors.”

Staines-based Richardson Roofing called Begbies Traynor administrators on October 23. The envelope contractor had an extensive portfolio of completed projects including internal cladding for West Ealing station and roofing for Kier Construction at the Grade II listed Morley House (pictured) on London’s Regent Street.

Other major clients included Bowmer & Kirkland, ISG, Osborne and Willmott Dixon.

In its most recent accounts for the year ending 31 August 2021, Richardson Roofing reported a turnover of £8.2m, up 19% from £6.9m in the previous year. However, it fell into the red as a pre-tax profit of £202,555 turned into a loss of £135,822. Cash on hand rose from £2.9m to £1.2m, but the company paid an ordinary dividend of £2.3m for the year.

A company was bought out of administration in October. Durham-based Floors to Walls collapsed amid “commercial challenges in the 24 months following the outbreak of the Covid-19 pandemic and the closure of non-essential businesses”, according to administrators FRP.

The residential cladding business was sold to F2W Ltd for £40,000. Floors to Walls recorded a turnover of £1.9m in its most recent accounts to 31 May 2022.

Much darkness, little light

Almost 6,000 construction firms are on the brink of bankruptcy, according to Begbies Traynor’s latest quarterly red flag alert report. This is a 46% increase compared to the Q2 2023 report.

Wayne Beck, partner in the finance and restructuring team at law firm Faegre Drinker, said this is “clear evidence of the effect the current economic climate is having on UK businesses”.

He added: “Now more than ever, companies should consider restructuring options to free up cash flows and ensure the best chance of weathering a turbulent economic climate.”

Administrations have not yet reached their peak in construction and other industries, according to Sarah Rayment, managing director and co-head of Kroll’s global restructuring practice.

“The cost of borrowing and the lack of access to working capital, together with the difficulties of passing on the rising costs of suppliers and materials, will certainly continue to leave companies incredibly vulnerable,” he added.

The Bank of England announced on November 2 that it was keeping its key interest rate at 5.25 percent, but it remains high by recent historical standards.

“High interest rates and a lack of credit are having a significant detrimental impact on contractor cash flows,” Mishcon’s Hanson said.

This was echoed in a joint statement on 31 October by the chief executive of the Federation of Builders’ Traders, John Newcomb, and the chief executive of the Building Products Association, Peter Caplehorn. They described growing cash flow and liquidity issues, adding: “Everyone in the industry, from customers to contractors to the material supply chain, has a role to play in addressing this.

“For example, the tightening of payment behaviors among tier one, two, three and four contractors only increases market pressures, especially on smaller companies.”