Michael J Lonsdale owed more than £120m when he collapsed, Construction news can reveal
The Berkshire-based mechanical and electrical (M&E) specialist entered administration in October, after 36 years of trading.
A new report by Begbies Traynor’s administrators has revealed the company owed trade creditors £65m, employees £3.4m and connected business Michael Lonsdale Ltd £50m for an inter-company loan.
He also owed HMRC at least £1.7m when he went down, according to the report.
In its latest published accounts, for the year to 30 September 2022, the company had a turnover of £191m. According to Begbies Traynor, it was on track to report revenues of £250m in the following financial year.
Administrators say the firm’s dozens of trade creditors are unlikely to receive any of the money they are owed.
Lonsdale became an employee-owned trust at the start of 2020, with the company’s 265 staff set to lose £2.9m. However, they must be paid any wages, salaries and holiday pay owed to them.
The report also reveals that the contractor went under after its commercial credit rating declined.
According to the report, after being hit by Covid, Brexit and the effects of the war in Ukraine, “the company faced a new obstacle in 2023 as credit ratings began to decline, putting strain on your cash reserves, [and] insurers drastically cut their credit ratings in August 2023.
“Some cases required the company to operate on proforma invoices, which is a significant challenge for a company with a turnover of £250m.”
Throughout the summer, he sought an injection of cash to stay afloat, but his attempts, including securing an initial deal on a £15m loan, failed.
One lender decided not to proceed with the deal, “citing concerns about timing disparities between applications, certification, invoicing and recent administrations of large construction companies,” the report said.
Administration was determined to be the best way forward at an emergency board meeting on September 28, and it took effect on October 2.
“This decision marked a sad day for directors and employees, many of whom had been with the company for most of their careers,” the report said.
The contractor, which also had offices in London and Essex, worked on major projects including the Paddington Cube, the British Museum extension, 8 Bishopsgate Tower and Battersea Power Station.
It was the UK’s seventh largest M&E contractor, as calculated in the CN Specialist Index 2022. Had it continued to trade on a turnover of £250m, it would have risen to fifth in 2023.
