Construction in Crisis – Time for a Reconstruction?

The ongoing economic crisis continues to take its toll on the construction industry with the sad news that a high profile company that was more than 100 years old has gone into administration.

KPMG have been appointed as administrators of London-based Holloway White Allom, which recently completed a refurbishment of the Victoria & Albert Museum, for which it won a conservation award.

The company, founded in 1882, was known for high profile contracts including the refurbishment of the Bank of England in the 1930s, the construction of Admiralty Buildings on Horse Guards Parade, of the Old Bailey in the early 1900s and the fountains in Trafalgar Square.

Although the company was undergoing a turnaround and restructure, following a cash injection earlier in the year from private equity firm Privet Capital, it is understood that it was forced into administration by late payment for one large project.

This latest high profile casualty comes as the construction industry faces increasing pressure. ONS figures show that output on public housing was down by 5.3% and on other public projects by 7.5% during the three months to August 2011 compared with Q3 last year, and accountancy firm Deloitte reports that the number of property and construction companies that went into administration in Q3 2011 rose by 11% to 117 compared to 105 in the same period last year.

However, some sectors of the industry are faring better than others.  Bellway, for example, this week posted a 50% annual increase in pre-tax profits, smaller construction companies focusing on repair and refurbishment are also surviving well and commercial construction activity has increased for the 19th month in a row.

Those companies that took steps to restructure their business to focus on what is likely to survive in a declining market and to deal with indebtedness early in the recession have done well. 

This suggests that those companies with a bad debt or over-indebtedness due to historical loans should consider restructuring their businesses before they run out of cash. It is not too late for them, but they are likely to require a restructuring adviser to help them.

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