Look up the definition of ‘icon’ and you will see the following: “A person or thing regarded as a representative symbol or worthy of veneration.”
Last week saw the publication of the administrator’s proposals for Bristol-based contractor Ikon Construction.
The now-defunct Ikon is unlikely to be venerated by any of the 546 creditors left in its wake. However, the company does provide a ‘representative symbol’ – a symbol of how construction administrations typically come to pass.
The root causes of Ikon’s demise could equally be applied to dozens of construction firms that have failed in recent years.
Ikon Construction was formed in 2000. After more than a decade of steady growth, turnover ballooned from 2014. In March that year Ikon’s turnover stood at £9.4m; by 2018 this had increased by 388 per cent to £45.9m.
Rapid revenue growth as the preamble for a construction administration is a path well trodden.
Take Crummock Construction, the Scottish groundworks firm that went bust in June. In the year leading up to its collapse, turnover grew by 40 per cent.
Lagan Construction, which went down owing £21m in May, saw turnover leap from £109m 2015 to £149m in 2016. Much of this was driven by the firm taking on bigger contracts than it had previously, some of which ended in substantial losses.
According to Ikon’s administrator, several poorly priced residential schemes and a large commercial contract cost it £1.5m for the year to March.
Lakesmere, Lagan Construction, Dunne and Carillion: problem contracts were cited as major factors behind all these failures.
For Ikon, this was compounded by a health and safety investigation and a lack of confidence among clients in its ability to complete contracts.
As well as the build-up, the similarities extend to the fallout from these administrations.
Ikon owed £9.85m when it went down, including £2.5m in retentions. Hundreds of businesses were left out of pocket, others out of business.
Ikon’s creditors include RV Services SW, which went into administration in January.
The firm’s collapse cannot be directly attributed to money owed by Ikon. But there’s no disguising the fact that RV Services collapsed with liabilities of £640,00 and was owed £186,114 by Ikon.
And what has happened to Ikon’s directors since the collapse?
On 14 May, just three months before the company ceased trading, the two men set up Spec Projects.
Spec Projects has since been busy, having already agreed a deal with Glenmore to novate contracts previously held by Ikon Construction to the firm. It also agreed a deal with the administrator to buy all of Ikon’s plant, machinery and office furniture.
The same directors, working for the same client, using the same machinery, and perhaps even conducting board meetings from the same swivel chairs.
The collapse of Ikon Construction provides an all-too familiar blueprint for why construction firms go out of business.
But it also shows just how quick and easy it can be for those who have overseen the collapse to regroup and restart the business.
All of this while creditors reel in the aftermath.