Construction In Crisis - Time For A Reconstruction?
The construction industry continues to struggle in the ongoing economic crisis with
the sad news that a high profile UK 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 has just completed a refurbishment of the Victoria & Albert Museum, for which it won a conservation award.
The company, founded in 1882 by Thomas and Henry Holloway, was responsible for the refurbishment of the Bank of England in the 1930s and had previously been involved in the construction of Admiralty Buildings on Horse Guards Parade, the Old Bailey in the early 1900s and the fountains in Trafalgar Square.
Its civil engineering projects included many famous London bridges including Hampton Court Bridge, Wandsworth Bridge and Chelsea Bridge.
KPMG has made no comment but it is understood that although the company was undergoing a turnaround and restructure, following a cash injection earlier in the year from private equity firm Privet Capital in return for a majority stake in the company, 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. Output on public housing is down by 5.3% and other public projects were down by 7.5% during the three months to August 2011 compared with the same period last year, according to the ONS (Office of National Statistics). The sector, which accounts for 6-8% of GDP, has been one of the worst hit by the 2008 economic crisis.
According to the accountancy firm Deloitte 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. For example, Bellway recently posted a 50% annual increase in pre-tax profits, which it attributed to higher sales, better margins and tighter cost control. The smaller construction companies focusing particularly on repair and refurbishment are also surviving well.
Commercial construction activity has increased for the 19th month in a row, according to Markit, the purchasing managers' index, but new orders for public housing and public works have continued to decline.
Similarly companies specialising in aspects of construction, such as installation of heating and ventilation systems and plumbing, are continuing to see growth but sales of construction products such as steel and cement have gone into negative territory according to the Construction Products Association.
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 implies that those companies with a bad debt, as allegedly happened to Holloway White Allom, 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.
Copyright (c) 2011 Alison Withers
by: Alison Withers
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