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Administrations: tide turning but risk remains

The number of construction firms entering administration has fallen significantly over the past 12 months compared with the previous two years.

In Q1 2013 the Department for Business, Innovation & Skills recorded 66 administrations in the construction industry in England and Wales, down from 85 in Q1 2012. This fell to 62 in the second quarter compared with 96 in Q2 2012, and then dropped to 39 in Q3 - down almost 50 per cent from the 74 construction administrations in Q3 2012.

Meanwhile, the number of voluntary liquidations in construction has fallen to 1,359 in England and Wales as of the end of Q3 2013, down from 1,607 at the same time last year, according to BIS.

Insolvencies falling

The number of insolvencies in the construction industry is much higher, and includes contractors that have gone straight into liquidation without first entering administration.

“Figures from Experian showed construction has seen the greatest reduction in insolvencies”

There were 719 insolvencies in England, Wales and Scotland in Q1 2013 and 698 in Q2 2013, according to BIS. The completed figures for Q3 2013 have not yet been submitted. However, the trend for insolvencies is also improving.

Figures from Experian showed construction has seen the greatest reduction in insolvencies, from 232 in September 2012 to 191 in September 2013.

This is good news for the industry, but of little comfort to more than 167 contractors that have gone into administration so far this year.

Continuing consequences

SME firms have continued to be most at risk of administration and insolvency in 2013. In September, credit agency Experian said larger contractors with 100 to 500 employees had seen the biggest fall in insolvencies in the year to September 2013, from 0.16 per cent down to 0.09 per cent.

In January 2013, a senior management buyout saved around 300 jobs at one of the UK’s largest privately owned civil engineering companies, Hewlett.

When Daniel Contractors went into administration in May, administrators at Deloitte safeguarded 1,226 of the firm’s 1,449 jobs by transferring work and employees to other firms. However, 430 jobs were lost when Rowecord Engineering, part of the UK’s third largest steel firm Rowecord Group, went into administration in April.

“76 per cent of members expect turnover to increase or at least hold steady over the next 12 months”

Steve Bratt, ECA

The Welsh contractor had worked on the Aquatics Centre for the London 2012 Olympics and had a turnover of £68m in 2012.

April also saw award-winning Olympic Park groundworks firm McArdle enter administration. Administrators at PwC said 71 of the 155 directly employed staff were made redundant as it sought a buyer for the business in June.

In October, 293 jobs were lost when London-based electrical cabling contractor Murphy Limited collapsed.

Smaller, specialist contractors went under across the country, including Scottish concrete firm AJ Clark Group in March, Cardiff-based Opco Construction in June, Bristol-based groundwork firm d20 in July and Essex-based M&E contractor HPEMS in September, with the latter case being attributed to “non-payment by main contractors” according to administrators at Begbies Traynor.

Outlook improving

Although M&E contractors have had a particularly difficult time during the downturn, Electrical Contractors Association chief executive Steve Bratt says the outlook was beginning to improve for its members.

“2013 has been tough for building services,” Mr Bratt says. “However, our latest business trends survey shows 76 per cent of members expect turnover to increase or at least hold steady over the next 12 months.”

With order books picking up and confidence returning to the construction industry, the picture looks brighter for 2014. However, the rising price of labour coupled with build cost inflation means contractors will approach 2014 with caution.

Firms reborn

Founded in 1970, Rowecord Engineering has worked on high-profile projects such as the London 2012 Aquatics Centre (left) and Crossrail’s Paddington Station redevelopment.

The firm entered administration in April this year, resulting in the loss of 430 jobs. But in September 2013, steelwork manufacturer Mabey Bridge launched a steel structures business led by former Rowecord Engineering staff.

Mabey Steel Structures will initially focus on manufacturing for stadia, health and commercial schemes. It is led by Jason Churcher, previously sales and proposals director of Rowecord Engineering, and its staff include former technical director Paul Benwell and ex-engineers, estimators and technical staff.

This is not the only instance of this happening in 2013; when Ocon Construction folded in March 2013, the firm was working on Crown Place student accommodation scheme for Liverpool University.

Following the administration, the university set up a subsidiary company, University of Liverpool Construction Company, which took on the delivery of Crown Place and staff that had been employed by Ocon Construction to finish the job.

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