Small firms dominate November casualty list

Monthly contractor administrations are inching upwards but the year-on-year trend remains positive, according to the latest data from Creditsafe.

A total of 30 construction firms entered administration in November. After a lull in July (19) and August (18), September and October saw 24 and 28 companies go under respectively.

But the latest monthly tally was still down compared with November last year (33). And the year-to-date total of 266 administrations was 23 per cent lower than the 345 recorded by Creditsafe from January to November 2023.

November’s casualty list was dominated by small residential construction firms. And 11 of the companies had one or no employees below director level in their most recent accounts.

The exception was Cheshire-based Lyjon Co Ltd, which called in administrators from Opus Restructuring on 5 November.

The commercial and industrial contractor was large enough to be required to file turnover and profit figures with Companies House. It had separate divisions for construction, electricals, insulation and cladding.

Its website, which is still live, states that the firm specialised in jobs worth £10,000 to £1.5m.

Clients included Knowsley Housing Trust (now Livv Housing Group), Cheshire Council, Tate & Lyle, United Utilities, Shotton Paper and Georgia-Pacific.

Its most recent accounts, covering the year to 30 September 2023, showed turnover of £7.9m. This marked a 3 per cent decrease on the previous year’s £8.2m.

The firm slipped further into the red as its pre-tax loss deepened from £121,772 in 2021/22 to £1.2m the year after.

Lyjon’s cash at hand halved in 2022/23, falling from £1.1m to £554,726. Its average number of monthly employees also decreased, from 60 to 49.

The Ellesmere Port-based contractor held £100,000 in bank loans repayable within 12 months, and £166,667 repayable after more than one year.

Also entering administration in November was St Albans-based Crown Brickwork & Scaffolding Ltd, with insolvency practitioners Verulam Advisory appointed on 14 November.

Crown Brickwork & Scaffolding had a workforce of more than 300 people, according to its still-active website. Clients included housebuilders such as Vistry and Barratt Homes.

In its most recent accounts for the year to 31 July 2022, the firm had £39,583 in bank loans repayable after more than one year but just £5,000 repayable within 12 months.

Receivers from Savills were appointed for another Hertfordshire firm, Harpenden Building Solutions Ltd, on 8 November. The company recorded turnover of £120,238 for the year to 31 March 2024, versus £145,945 the year before. Pre-tax profit more than halved, though, from £25,234 to £11,508.

The firm reduced its short-term debts to trade creditors from £309,363 to £60,104. But its long-term bank overdrafts grew from £1.8m to £2.1m in its latest accounts.

Outlook

Construction firms appear more optimistic about their prospects, according to the monthly Business Barometer from Lloyds Bank. The survey found that sector confidence increased from 50 per cent in October to 56 per cent in November.

“Construction confidence hasn’t just risen month-on-month – it’s also significantly stronger than the UK business average [41 per cent],” said Max Jones, a director in Lloyds’ infrastructure and construction team.

“Businesses in the sector will be looking to build on this positive outlook and are setting clear priorities for how they plan to drive further growth.”

On the other hand, there is concern that announcements in October’s Budget will cause problems for contractors.

Construction firms face “increased pressure from the recent hikes in National Insurance contributions and the living wage”, said Andy Taylor, partner and head of restructuring at law firm Shakespeare Martineau.

“In an industry heavily reliant on labour, these additional costs will inevitably strain cashflow, particularly for small and mid-sized contractors.”

Contractors will have to confront “mounting payroll expenses” alongside long-standing challenges around material costs and supply chain delays, he added.

“For construction businesses already operating on slim margins, the combination of these factors could prove decisive. Colleagues within our construction sector team report a troubling trend where even well-established firms are now facing financial difficulty.”

Benjamin Wiles, managing director at financial risk advisors Kroll, told Construction News: “Thin margins driven by competitive tendering, coupled with the increased cost of borrowing and a tight labour market, leave businesses with little room for error. Project overruns and unforeseen price hikes have also created a lot of issues given the lack of contingencies many companies have in place.

“Construction businesses looking to mitigate the impact of these challenges in 2025 must adopt a proactive approach” and focus on operational efficiency, he said.

“Upskilling the management team and prioritising cashflow management will be essential to navigating these issues. Avoiding the pitfalls of overtrading and maintaining financial discipline will also be crucial to stay resilient.”