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April 24, 2024

Rising tide of business failures shows no signs of ebbing

Rising tide of business failures shows no signs of ebbing

Administrations continue to rise as insolvencies soar and more construction firms teeter on the brink

The construction sector started 2024 with yet another year-on-year increase in business administrations.

Data from Creditsafe showed that 26 firms collapsed in January compared with 15 in the first month of 2023.

Just four companies on the January list – Stewart Milne Group Ltd and three of its subsidiaries – were large enough to file detailed turnover and profit figures with Companies House.

Stewart Milne Group turned over £172.4m in the year to 31 October 2022, posting a pre-tax profit of £16.5m after three successive loss-making years. The housebuilder owed creditors more than £178m and had 418 employees at the time of its most recent published accounts.

Stewart Milne Homes (Arbroath) Ltd was listed as a dormant firm by Companies House, while Stewart Milne Homes (Auchterarder) Ltd posted revenue of £11.7m for the year ending 31 October 2022, down from £15.7m in 2020/21. The firm slipped into the red, with a pre-tax profit of £353,000 turning into a loss of £3m as it acknowledged a “reduction in sales volumes”.

Administrators from Teneo were appointed to all three of the companies after fruitless efforts by group chair and founder Stewart Milne to find a buyer, despite an extension to the parent company’s bank facilities with Bank of Scotland until 30 June this year.

BDO is overseeing the affairs of the fourth company, Stewart Milne Homes North West England. This Manchester-based subsidiary saw its turnover fall 26 per cent in the year to 31 October 2022 to £45.9m.

All the Stewart Milne businesses in administration have ceased trading and halted construction activity.

Among the other firms to go under in January was Chelmsford-based Trusko Ltd, which was involved in residential refurbishment schemes in London plus a new-build housing scheme in Hoddesdon, Hertfordshire.

In the company’s most recent unaudited and abridged accounts, covering 1 November 2021 to 31 March 2023, its total assets were valued at more than £1.3m. However, at the time, the company’s debts left it with net liabilities of close to £800,000, tipping it towards collapse.

Trusko entered into a Company Voluntary Arrangement (CVA) on 30 June 2023 but decided on 8 January this year to go into administration instead. Documents filed with Companies House show that the determining factor was Trusko’s insurance provider refusing to renew the firm’s policy because of its CVA status. Trusko was unable to find any other affordable cover on the market, and trading had become extremely difficult amid “significant cashflow pressures”.

Kenham Building Ltd, which focused on building and renovating high-end residential properties in central London, entered administration on 9 January with Chris Farrington and Cameron Gunn of ReSolve Advisory appointed as joint administrators. The company “recently encountered significant technical groundworks issues on a large residential refurbishment project, which led to financial losses and consequently to cashflow problems”, ReSolve noted in a statement. All employees have been made redundant. The firm employed a monthly average of 19 workers in its most recent accounts, to 31 December 2022.

Bleak numbers

Last year saw a surge in construction insolvencies, and there are numerous indications that the pain is far from over.

Interpath Advisory director Tim Bateson said: “The building and construction sector continues to face a number of headwinds, including persistent cost inflation and material shortages which have had the effect of eroding the thin margins that are so often seen in competitive fixed-price contracts.”

In its latest quarterly Red Flag Alert, issued on 22 January, insolvency practitioner Begbies Traynor announced that more than 83,000 construction firms were in “significant financial distress” and 7,849 others were on the verge of collapse. This gloomy picture is borne out by the Insolvency Service, which revealed on 30 January that construction insolvencies rose from 4,143 in 2022 to 4,371 in 2023 – an increase of 5.5 per cent.

“It’s exceptionally tough out there,” said Rebecca Chaplin, partner in Moore Barlow’s insolvency and restructuring team. “Many construction firms only survived the [Covid] pandemic due to government support and low-interest loans. We’ve now seen five quarters on the trot where 1,000 construction businesses have folded… For context, no other quarter since records began in 2013 have topped 1,000.”

The Construction Products Association (CPA) has predicted a 2.1 per cent drop in sector output this year, to be partially compensated by a 2 per cent recovery in 2025. It expects industrial construction output to fall most steeply (7.5 per cent) in 2024, followed by private housing with a 4 per cent drop.

“Insolvencies remain at their highest level since the financial crisis as we are now starting to see the impacts of the declines in private housing new-build and repair, maintenance and improvement that began in 2023,” said CPA head of construction research Rebecca Larkin.

“These are the two largest construction sectors and account for around 40 per cent of total construction output volumes… Given this continued slowdown plus the persistent impact of labour and material costs, the latter still being 38 per cent higher than pre-pandemic, there is a clear risk that contractor insolvencies may rise further this year.”

Company nameLocationDate of administrationDocuments filedDescription of company activities
ALAN WEDDELL DRYLINING & PLASTERING LTDTyneside08-JanIn AdministrationPlastering
BREEM CONSTRUCTION LTDKent04-JanIn AdministrationOther specialised construction activities n.e.c.
BROWSIDE LTDLiverpool09-JanAppointment of Receiver / ManagerDevelopment of building projects
CGDP REALISATION LTDWarwickshire18-JanIn AdministrationDevelopment of building projects
CLARITY HOMES & COMMERCIAL LTDEast Sussex11-JanIn AdministrationConstruction of domestic buildings
CLICK HERSCHEL LTDHertfordshire29-JanAppointment of Receiver / ManagerDevelopment of building projects
COLUS LTDSomerset13-JanIn AdministrationOther construction installation
DW ELECTRICAL LTDBrighton25-JanAdministration OrderElectrical installation
ENROK CONSTRUCTION LTDStafford23-JanAdministration OrderConstruction of domestic buildings
FIRST CALL ESTATES LTDMilton Keynes26-JanAppointment of Receiver / ManagerDevelopment of building projects
HAWKS DEVELOPERS LTDEast Sussex22-JanAppointment of Receiver / ManagerDevelopment of building projects
HOUSEDOM 59 ADDINGTON LTDLondon19-JanAppointment of Receiver / ManagerConstruction of domestic buildings
KENHAM BUILDING LTDLondon09-JanAdministration OrderConstruction of domestic buildings
MS SHAW BUILDING CONTRACTORS LTDWest Midlands31-JanIn AdministrationConstruction of domestic buildings
MACKENZIE LIVING (FOLKESTONE) LTDKent11-JanAppointment of Receiver / ManagerDevelopment of building projects
MACKENZIE LIVING LTDEssex11-JanAppointment of Receiver / ManagerDevelopment of building projects
MARY BAMBER DEVELOPMENTS LTDConwy03-JanAppointment of Receiver / ManagerDevelopment of building projects
NORTH HYLTON DEVELOPMENTS LTDSunderland08-JanAppointment of Receiver / ManagerDevelopment of building projects
PRODEV (NE) LTDDurham12-JanAppointment of Receiver / ManagerConstruction of other civil engineering projects n.e.c.
SN HADDENHAM LTDLondon24-JanAdministration OrderDevelopment of building projects
SOVEREIGN PROPERTY SERVICES LTDPeterborough25-JanAdministration OrderOther construction installation
STEWART MILNE GROUP LTDAberdeen08-JanIn AdministrationConstruction of commercial buildings
STEWART MILNE HOMES (ARBROATH) LTDAberdeen08-JanIn AdministrationOther specialised construction activities n.e.c.
STEWART MILNE HOMES (AUCHTERARDER) LTDAberdeen08-JanIn AdministrationConstruction of commercial buildings
STEWART MILNE HOMES NORTH WEST ENGLAND (DEVELOPMENTS) LTDManchester16-JanIn AdministrationConstruction of commercial buildings
TRUSKO LTDEssex11-JanIn AdministrationDevelopment of building projects

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