Fit-out firms lead July failures

Fit-out firms took a battering in July, with three specialists among the biggest casualties of the month.

In total, 19 firms went under last month, dropping from 31 last month and 24 the month before.

Surrey-based Beck Interiors was the largest to hit the brakes. Adminstrators from Begbies Traynor saved part of the £140m-turnover business in a pre-pack sale, including a “major contract”.

The firm filed for administration on 23 July after 30 years in business, blaming an “ongoing customer dispute”, supply chain failures and increasing costs on existing contracts. One of the firm’s subcontractors told Construction News at the time that it had sensed Beck was in trouble last year, leading it to turn down further work on one of its biggest projects.

Beck worked on luxury hotel fit-out jobs in some of London’s plushest districts, including The Whiteley near Hyde Park for multinational resort brand Six Senses.

Another major July casualty, Blenheim House, was also a Surrey-based luxury specialist. The firm worked on major refurbishment and fit-out projects in London and the South East. It posted its first-ever loss in January, blaming the £137,000 pre-tax loss on costs and delays resulting from some of its subcontractors going out of business. As of April 2023, it owed £13.4m to trade creditors and employed about 80 employees.

The third large fit-out contractor to hit the buffers was Paramount D&B Ltd, formerly known as Paramount Office Interiors. The £29.5m-turnover firm, based in Cardiff, specialised in office design and fit-out. It made a pre-tax profit of £1.1m in the year ending 30 June 2022, up from £709,000 the year prior.

July also saw a 120-year-old facade veteran topple. Charles Henshaw & Sons was founded in 1904 as an architectural metalworking company, launching a glazing division in 1982. Reporting on the financial year ending 31 January 2023, director Graham Chung wrote that the firm had incurred costs on legacy contracts and was anticipating more in the future. Combined with project delays on site, the company’s turnover had slipped 13.4 per cent from £21.4m to £18.5m and it posted a pre-tax loss of £3.9m.

It went under on 12 July, risking the jobs of 72 staff. Chung said: “I am proud of our distinguished reputation built over many decades, and it is with deep regret that, after exploring every avenue to keep afloat, we are unable to continue.”

Security firms Connaught Security and FTS Merit, both owned by Ramm Holdings, went into administration at the same time.

Connaught Security provided fencing, CCTV and access gates, mostly on new-build housing. Its turnover had suffered in recent years, dropping from £12.4m for the year ending 30 June 2022 to £4.3m for the year ending 30 June 2023. The company started to face stark cashflow pressure after one of its major customers, Stewart Milne, went bust in January. It calculated that £1.3m of the £1.4m net loss it made in the year ending 30 June 2024 was due to bad debt from the collapse of Stewart Milne.

Accountancy firm Forvis Mazars stepped in in June to support the struggling firm, but quickly concluded there was “no reasonable prospect” of a rescue because it did not have enough cash to pay weekly wages of around £40,000 or pay suppliers to restart work. It faced a winding-up petition from HMRC aimed at recovering £1.7m owed by FTS Merit. Forvis Mazars took the company into administration on 4 July after deciding that pressure from creditors was too great to keep the company trading long enough to agree a sale.

Tech startup Hypertunnel, which entered administraion on 9 July, had claimed it could transform the risk profile and drive down the cost of tunnelling through AI, machine learning and swarm robotics. At the time of its last set of accounts, for the year ending April 2023, it owed trade creditors £140,000 within a year.

PRSL Realisations 2024 (formerly Premier Roof Systems Ltd), which specialised in window design and installation, hit the rocks after a winding-up petition from TuffX Processed Glass. Adminstrators from FRP were appointed  on 17 July, and managed to sell part of the business to GableCo Ltd.

Economic hangover

Andrew Pepper, head of restructuring at ReSolve, said developers were still dealing with the hangover from Covid, Brexit and the global financial crisis, and ongoing high interest rates were hampering smaller firms’ ability to access finance.

He said: “What some may find surprising is the amount of nervousness from large-scale funders, many of whom are pulling deals they would happily have funded only one or two months ago, as they look to invest in opportunities where their funds can be rotated on a shorter timeframe.”

However, Pepper added that there were “plenty of reasons for optimism”.

He said: “With the base rate dropping, and likely to fall further this year, planning rules facing a shake-up from the new government and house prices remaining resilient, the homebuilding market should be in a positive frame of mind.

“We are optimistic about the future of companies in this sector, even though the number of administrations, as shown by the Creditsafe data, will persist at a high level until legacy issues begin to unwind and companies once again have access to sufficient and affordable capital.”

Gareth Harries, partner at restructuring firm RSM UK, added that subcontractors were suffering particularly badly at the moment as principal contractors push down on firms within their supply chain.

“Main contractors are delaying payments because they’re not getting paid themselves. I have seen a couple of construction jobs recently where that’s exactly what’s happening.”

Chris Davies, founding director of DRS Bond Management, said the fit-out sector tended to be less exposed to volatility in the bonds market because bonds were often fairly short and money flowed relatively quickly.

“The reality is, things are not good at the moment. The surety market is relatively stable compared to where it was but there’s still upwards pressure on rates,” he said. “Blenheim House is another kick. But it’s more death by a thousand cuts than the result of huge losses like we saw in 2023.”