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Scottish civils firm Crummock collapses as retentions blamed

Scottish-based civil engineering contractor Crummock has entered administration with the loss of 287 jobs.

The Midlothian-based firm specialised in groundworks, particularly for the roads sector.

Administrator Johnston Carmichael blamed Crummock’s collapse on cashflow problems exacerbated by high retentions.

The adminsitrator’s restructuring partner Matt Henderson said: “Crummock is a long-established construction business which, like many in the industry, has suffered from reduced margins in recent times.

“In recent months it has also encountered cashflow difficulties due to high retention levels, the tight margins within the sector and business specific issues.”

“Unfortunately, the business was unable to raise the capital to enable it to overcome the current financial challenges it faces and we are now dealing with creditors’ claims.”

Crummock reported a £596,000 pre-tax profit on turnover of £23.9m in its last filed accounts for the year to 31 March 2017.

This marked an increase from a profit of £366,000 on a £23.1m turnover the previous year.

However, the firm’s cash position had dropped from £248,000 in 2016 to £23,000 in 2017.

Director Derek Hogg said in a statement in its last accounts that the company would continue to expand throughout 2017.

Crummock expected turnover to jump more than 40 per cent to £34m by the end of March this year.

Mr Hogg had acknowledged in its last accounts that cuts to local government budgets in Scotland combined with labour shortages were a risk to the business.

Strong relationships with private sector clients and places on long-term frameworks were expected to keep the company’s growth on track, however.

CECA Sctoland chief executive Grahame Barn said Crummock’s collapse highlighted the difficulties facing construction SMEs.

“This is a sad day for the civil engineering sector in Scotland and comes at a time when there is little sign of optimism for future workload growth in the sector, and SMEs in particular are facing significant challenges.

“Our thoughts are with all the directors, employees and creditors of that company at this very difficult time.

“CECA Scotland will be actively involved in supporting Crummock employees impacted through this very challenging period.”

Crummock’s Mr Hogg is also CECA Scotland chairman, but will now step down from the role as the organisaiton works to ensure its “activities continue as normal”.  

Crummock, which was established in 1991, primarily worked on a self-delivery basis and described itself as a “one-stop-shop” for civils, surfacing and road markings, subcontracting only for specialist skills.

Last month the firm won places on a £46m Edinburgh council roads framework, and in the middle of 2017 began work on a housing refurbishment deal for the same council that would run to mid-2021.

The business had recently been working on two Places for People contracts that would see more than 310 homes built in Edinburgh, as well as a scheme at the historic Donaldsons building in Edinburgh for Cala and City & County, on which Bam Construction was the main contractor.

Crummock is the latest in a string of SME contractors that have collapsed since the start of the year.

Bristol-based Ikon entered administration this week, with the £36m-turnover company making 50 people redundant.

In March Vaughan Engineering called in administrators owing £9m to suppliers. It cited the failure of Carillion as a major reason for its own collapse.

Analysis by corporate recovery firm Begbies Traynor found more than 60,000 construction firms were in ‘significant’ financial distress in the first three months of 2018 – a 26 per cent increase on the same period 12 months ago.

The collapse of Carillion in January along with delays to infrastructure projects were cited as major factors for the rise.

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