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GB is a timely reminder of the perils of recovery

They say it’s not recession that kills vulnerable companies but the emergence from recession.

That old adage may have been on people’s minds this week with the news that GB Building Solutions has gone into administration.

The well-respected company was set up following a management buyout 10 years ago from family-owned Gleeson (which is still a major shareholder), and is arguably the recovery’s biggest casualty to date.

More than 350 employees of the £200m-turnover business and parent GB Holdings, which is also in administration, have lost their jobs.

Clients have been left with projects in limbo. Suppliers are urgently looking to see how they can get the thousands they are owed.

Many will be lucky to retrieve all - and in some cases any - of these payments.

Further tremors

The aftershock will send ripples across the industry, as other contractors begin to worry whether firms in their own supply chain will be additional casualties of GB’s demise.

“The bottom line is that contracting is a risky business with little room for error - and sometimes there’s a fine line between luck and judgement”

Construction News has certainly been inundated with calls from worried subcontractors desperate for information.

Meanwhile rivals have begun picking over the books and the postmortem of what went wrong begins in earnest. There are unlikely to be any great surprises.

Clients talk of jobs being secured at bargain basement prices, seemingly without a hint of irony that sustainable contractors need to make a margin.

Tricky deals

Administrators have pointed to problem contracts which left GB struggling with its own cashflow crisis.

The company has certainly stretched itself, increasing turnover and winning a slew of major schemes in the last 12 months.

One of the firm’s well-documented problem contracts has been the £28m student accommodation block at Manchester Metropolitan University’s Birley Campus, though how much of a role this had in its downfall we don’t yet know for certain.

Student accommodation contracts, of which there were a few on GB’s books, are notoriously tricky - coming as they do with crippling penalties if residences fail to open on time.

The bottom line is that contracting is a risky business with little room for error - and sometimes there’s a fine line between luck and judgement.

The situation is an awful long way from the glitz of MIPIM and the froth of the London contracting scene - and a harsh reminder that, for many firms, it’s still a tough world out there.

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