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South Eastern Electrical: Retentions pushed firm into administration

South Eastern Electrical (SEE) was made insolvent due to cashflow issues resulting from retentions and insurance claims, administrators have revealed.

Construction News exclusively revealed in October that the M&E subcontractor, which was incorporated in 1981, had fallen into administration.

A report by administrators Begbies Traynor has now revealed that the London-based company had tried to agree final accounts and retention releases of more than £2m prior to its collapse.

It said that a project it was working on for a “major client” in the London Docklands area had been hit by flooding.

SEE believed the client would substantiate the damage that had occurred to the insurers so that an insurance claim of around £400,000 could be released. Instead the client withheld the sums against what was due to the company, the administrators said.

It had also waited for practical completion on the project for more than a year.

This would have allowed for half its retention of circa £300,000 to be released, and the remainder of the contract works would have provided additional income of another £300,000. But this did not happen.

“During the same period the company has been attempting to complete five other major projects, all of which overran due to no fault of the company for a period of between six months to a year.

“As a consequence the company tried to agree final accounts and retention releases of circa £1.5m, which caused severe negative pressure on its cashflow,” the report said.

The company, which employed 120 staff and used a large number of subcontractors, had been unable to obtain a bond facility and so negotiated higher retention percentages payable on completion, which compounded its cashflow issues.

It was also waiting on two other insurance claims to be resolved at the time it went under.

The administrators said they will continue to pursue the insurance claims but due to their complex nature it is uncertain as to whether they can be realised.

In November, construction minister Richard Harrington said the government would announced changes to retentions policy “very soon”.

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