Fewer construction firms entered administration in the first month of this year than in November and December, Construction News can reveal.
Data from Creditsafe shows 15 construction companies filed for administration in January.
This reflects a downward month-to-month trend in administrations, with 34 construction companies falling into administration or receivership in November, followed by 23 in December. However, construction firms face continuing challenges to profitability from high interest rates, inflation, a labour shortage and higher wage demands.
The January 2023 figure is three higher than in January 2022, when 12 firms went under.
“Execution risk is going to dominate 2023”
Chris Davies, DRS Bond Management
DRS Bond Management managing director Chris Davies told Construction News that “January is a strange time” because many companies will have chosen to postpone December payments until the following month.
He referred to recent data from Begbies Traynor on the rising number of firms subject to county court judgements above £5,000, and noted the likelihood that the tempo of winding-up petitions is likely to increase in the coming months, adding: “I can only see the trend [for administrations] remaining at the rate it was last year, if not higher.”
Data from Creditsafe shows that most of the firms that went under in January were too small to be legally required to file full accounts with Companies House, but there was one major exception.
S&I Groundworks, a housebuilding contractor based in Burton-on-Trent, Staffordshire, described “significantly increased revenue and profits” in its most recent accounts, covering the 12 months ending 31 May 2021.
Turnover reached £41m compared with £24.7m in 2020, and S&I posted an operating profit of £1.79m, up from £1.16m the year before.
However, subsequent adverse trading conditions – such as the impact of COVID-19 and the Russian invasion of Ukraine last February – forced the firm to appoint administrators from KBL Advisory on 25 January.
KBL cited “significant cashflow pressure as a consequence of cost inflation and economic uncertainty” as the reason why S&I fell into administration.
The second-largest firm by turnover to go under in January was northern England-based housebuilder Brierstone.
It posted turnover of £9.65m and pre-tax profit of almost £105,000 in its most recent set of accounts, covering the year ending 31 August 2021.
Opus LLP was appointed as its administrator on 30 January.
As government support under the Coronavirus Business Interruption Loan Scheme and the Large Companies Scheme tapers off, there is the prospect of more construction-related firms being unable to make repayments.
“There are an awful lot of companies that are essentially zombie companies,” Davies explained, noting: “Execution risk is going to dominate 2023.”
Dry lining, curtain walling, facade and mechanical and electrical specialists in the supply chain were facing “real struggles”, he said. “Issues also remain with legacy fixed-price lump-sum contracts that were bid perhaps before or around the time COVID started.”
More optimistically, he said he believed inflation was less of an issue for the construction sector as it was now baked into most calculations. “Everybody has a contingency for inflation, and there’s a lot more common sense now about not always taking the lowest quote.”
Instead of bidding at a loss, tenderers are now “either making modest buying gains or are static, which is how it should be”, he added.
Inflation remains too high but it appears stable. Davies described it as “a ‘known known’”, adding: “The ‘unknown unknowns’ in 2023 will be the people that you think you’ve got in your supply chain who aren’t there any more – that is, the companies with the labour [you need] to get to sites to do the work.”
|Company name||Location||Date of administration||Type of documents filed||Construction activities|
|14 WATERLOO ROAD LTD||Liverpool||27 Jan||Administrative receiver appointed||Development of building projects|
|BDBUILD LIMITED||Hampshire||17 Jan||Administration order||Development of building projects|
|BIRNBECK (ST GEORGES HILL) LIMITED||Berkshire||12 Jan||Administrative receiver appointed||Development of building projects|
|BRIERSTONE LIMITED||Yorkshire||26 Jan||Administration order||Other building completion and finishing|
|CC1 KETTERING LIMITED||Northamptonshire||16 Jan||Administrative receiver appointed||Construction of domestic buildings|
|DAKO CONSTRUCTION LIMITED||Nottingham||30 Jan||Administration order||Other specialised construction activities|
|DELWEN LIMITED||London||10 Jan||Administrative receiver Aappointed||Development of building projects|
|EK DEVCO LTD||London||12 Jan||Administration order||Development of building projects|
|GS CONSTRUCTION ENGINEERING LIMITED||Hertfordshire||31 Jan||Administration order||Construction of commercial buildings|
|HAMES DEVELOPMENTS LTD||Yorkshire||30 Jan||Administrative receiver appointed||Development of building projects|
|LOK DEVELOPMENTS 05 LIMITED||Newcastle upon Tyne||2 Jan||Administrative receiver appointed||Construction of commercial buildings|
|LONDON SOUTH WEST SW LIMITED||London||19 Jan||Administration order||Development of building projects|
|MAUDLAND LTD||Lancashire||20 Jan||Administrative receiver appointed||Development of building projects|
|REMUS CONSTRUCTION & DEVELOPMENT LIMITED||Surrey||26 Jan||Administrative receiver appointed||Construction of commercial buildings|
|S & I GROUNDWORKS LIMITED||Staffordshire||25 Jan||Administration order||Construction of domestic buildings|