Ex-Osborne directors have blamed the 2022 Liz Truss mini-budget for problems with the firm’s build-to-rent development business, a new report reveals.
Leaders at the company said in April when the company filed for administration that its problems were caused by high inflation, the lingering impacts of Covid and Brexit, and a slowdown in public sector procurement.
A report released this week by administrators at RSM shed more light on what caused Geoffrey Osborne Ltd to go under.
Directors said JCT contracts not allowing compensation for project delays during Covid caused a significant financial impact on the firm’s construction division. The contractor failed to achieve expected settlements on a number of claims related to jobs in London, the report states.
The company bounced back with the September 2021 sale of its infrastructure business, which had thrived in lockdown, but further problems were on the horizon.
“The government’s mini-budget announced in September 2022 and the subsequent market reaction torpedoed the development business joint venture to develop build-to-rent properties, and negatively affected market sentiment in the construction sector generally.
“Housebuilding slowed generally and this led to an increased level of insolvency in the supply chain which impacted the company,” the report said.
In March 2023, a lender that provided Osborne with a £3.5m working capital facility withdrew from the construction sector, according to the report.
This caused further financial problems, with directors looking to cut costs and find money through redundancies, sale of the firm’s offsite manufacturing and property services businesses, and renting out its office space.
By the end of March 2024 it started failing to secure new contracts because it was unable to file its accounts for its 2022 financial year, but auditors could not sign off the business as a going concern unless it had the cash it needed from the new contracts.
“Regrettably the company faced a profound ‘Catch 22’ situation and in the absence of new funding it could not address the issue,” the administrators’ report says.
By April 2024 a potential buyer was interested in some parts of the company but a deal was not reached and the company filed for administration.
Earlier this month it was revealed that the firm owed £25.9m to trade creditors when it collapsed.
Some 504 firms were left with unpaid invoices when the contractor fell into administration on 30 April.
Osborne was awarded a contract to deliver a 55-home development called Carnival Place in Wokingham, Berkshire in March, weeks before it filed for administration. It took over the job from Mid Group which had gone under the previous year.
Wokingham Borough Council announced this week that Feltham Construction had been appointed to finish the job.
The local authority said it “undertakes thorough checks and ensures due diligence is done when appointing all contractors”.
