Original and replacement contractor on same scheme both turn to administrators

A local authority faces the prospect of having to change its main contractor on a residential scheme for a second time after the replacement firm announced it was suffering severe financial problems.

Last month, client Wokingham Borough Council announced that Osborne would take over a 55-home development called Carnival Place in the centre of the Berkshire town.

The regeneration scheme had initially stalled after the collapse of original contractor, offsite specialist Mid Group, in July 2022.

Parent company Geoffrey Osborne last week announced its intention to appoint administrators for its subsidiary companies, including Osborne Construction, though it said it hoped to sell “aspects of the business” and for them to continue trading.

There is no suggestion either company’s financial issues are connected to their work on Carnival Place.

In March this year, Wokingham Council released a statement about Osborne’s appointment saying that roof work on the buildings had begun in January, with fit-out due to start soon.

Residents would be able to move into the one and two-bedroom apartments in 2025, it added.

The development (pictured) is part of a town centre regeneration programme that includes the Carnival Hub building, which houses Wokingham Leisure Centre and Wokingham Library. The Hub was built by Pellikaan Construction and completed in 2022.

A Wokingham Council spokesperson said it was too early to comment on the situation involving Osborne.

“Given the risks inherent in all building contracts of this type, the council has rigorous policies in place to manage situations like this and will move to secure the site and complete the works should this be necessary,” they added.

The spokesperson said the council’s public procurement process involves financial credit checks, obtaining statements from referees and reviewing workloads to see if companies appear to be overstretching themselves.

“While every effort is made to ensure the financial stability of a company, we are only allowed to exclude providers on evidence of a poor credit rating, lack of/poor audited accounts, or financial misconduct. However, credit ratings and company accounts can often be dated more than 12 months prior,” they said.

“The construction industry is a particularly difficult industry to guarantee the financial stability of a company and is well known for companies going into administration, especially in the current climate, with inflation, interest rates and in the aftermath of the Covid-19 pandemic and Brexit.”

Wokingham Council uses JCT contract terms, has 14-day payment terms for suppliers and only uses suppliers that have pre-qualified using the PAS91 form that includes financial stability questions, the spokesperson added.

Last year, contractor insolvencies reached their highest level since the 2008/09 financial crisis, though there are signs that the rising trend may now be easing.

In a statement announcing its 2024/25 budget earlier this year, Wokingham Council noted that it receives the least funding from central government per resident of any unitary authority in the country.

It planned to spend £104m on housing, local economy and regeneration in the period, including on the Carnival Hub redevelopment.

Mid Group grew rapidly after being formed in 2014 but was one of a number of offsite specialists to go out of business in recent years. It turned over £55.7m and made losses of £2.7m in its last full year of trading.

Osborne has sold its offsite, property management and infrastructure divisions since 2021. It blamed residual losses on legacy projects and a lack of new investment for its latest problems.

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