Construction: Cricklewood

In the last year, the SFP Group has been appointed Administrator to more than 10 company failures from the world of construction – either directly (ie building companies, contractors etc) or those that provide products or services to the construction industry (ie from within the supply chain).

Many have shared similar issues: failing to plan for and accrue sufficient funds to pay Her Majesty’s Revenue and Customs (HMRC). This failure, combined with the current economic environment generally and the highly competitive construction industry specifically, have forced many businesses into an insolvency regime. Indeed there has been an alarming rise in insolvencies in recent times.

One recent example is Loughlin Scaffolding Supplies. Established in 1996, the Cricklewood-based contract scaffolding company specialised in the supply and erection of all types of scaffolding to the construction industry throughout the South East.

During 2002, the company moved from premises in Park Royal to the current premises on the North Circular Road in London, to aid its expansion plans and store its increasing level of scaffolding. Turnover continued to increase and in 2007, the company entered into a loan agreement with AIB Group to assist its cash flow.

The company’s turnover peaked during 2008 at £4 million per annum and from 2009 onwards, the level of trade declined as a result of the general economic downturn. By early 2012, its annual turnover had reduced to £2 million, and given that the company’s overheads remained at the same level, the reduction in turnover had a negative impact upon its cash flow.

As a result, the company’s liabilities increased and by April 2012, the debt owing to HMRC had mounted to approximately £180,000. Managing Director, Mr Loughlin was referred to an insolvency professional for advice and the company subsequently entered into a Company Voluntary Arrangement (CVA).

Contributions made by the company to the CVA Supervisor under the terms of the agreement have been caught under the trust for the benefit of the CVA creditors. Contributions were being made in line with the arrangement until November 2012 when it was determined that they could no longer be maintained by the company due to its cash flow difficulties.

As a result, the company was introduced to SFP. A meeting was held between Mr Loughlin and SFP and various insolvency proceedings were discussed. Mr Loughlin subsequently sought to place the company into Administration, by way of a director appointment. Eventually all of the assets were sold, with some of the stock and two of the vehicles going to one party and other vehicles to a number of other parties.

“One of the most notable aspects of this case, as stated, was the large amount owed to HMRC,” says SFP’s Daniel Plant. “With competition increasing, and margins continually squeezed, firms in the construction sector would do well to take heed and seek advice early.”