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Covid and the Construction Industry

Although the construction industry has largely been able to continue working throughout the current pandemic, it is facing huge uncertainty and challenges from the restrictions in place.   Here Cowgills Business Recovery director and insolvency practitioner Nick Brierley explains.

There has been huge uncertainty within the business community over the last 10 weeks since the Government implemented the restrictions upon us all as a response to the COVID-19 pandemic.

The Chancellor, Rishi Sunak, has periodically announced support for businesses in the form of the Job Retention Scheme, deferred HMRC payments, non means tested Time to Pay Arrangements, CBILS and Bounce Back Loans.

This has of course been of some assistance to many sectors; however, companies in the construction sector continue to experience difficulties during this very challenging time.

Despite the Government allowing construction sites to remain open, the effects of social distancing, obtaining materials and labour via the supply chain, delayed debtor payments and increased costs, have all had a detrimental effect on the sector.

Employers and contractors have had to carefully consider the Government and industry guidance and have incurred additional costs to ensure they are complying with the measures implemented to limit the spread of the virus and maintain safe working conditions.  This is all at a time when income has reduced significantly from that what was forecasted prior to effect of COVID-19.

As a result of the new requirements and constraints brought about by the virus, works may be running late and additional time and cost provisions within contracts have been enforced, which is resulting in further costs associated with legal advice and litigation.

Furthermore, many companies in the sector have experienced delays in starting new work that had been awarded to them prior to the beginning of the COVID-19 restrictions.  This, in turn, has resulted in periods without work, as a dedicated time period in the company’s schedule had been allocated and replacement work has not been obtained.

Due to the all of these ongoing challenges, businesses in the sector are experiencing considerable financial difficulty themselves, which in turn, has a knock-on effect to creditors and the contractual supply chain in general.  The result is that many within the sector are finding cash flow increasingly tight.

Just last week, J & P Carpentry and Joinery Limited (“J&P”), a subcontractor that had been hired by Interserve for the Birmingham NEC Nightingale Hospital facility, entered into Administration.  J&P had also been employed by Bouygues UK on a £15M extension project at Royal Wolverhampton School.  Despite this business trading successfully for over 30 years, the recent cash flow problems that it has experienced display the risk that is apparent for established businesses within the sector.

As restrictions and difficulties continue to be experienced within the construction sector, many other companies may also need to seek professional advice surrounding their ability to continue trading.

This does not have to be the case however, Nick comments:

“One of the biggest mistakes that struggling businesses make is ignoring financial problems until it’s too late.  Regardless of the current market conditions caused by COVID-19, an organisation may be able to successfully recover if they seek professional advice when financial strain is beginning to become significant.

“Corporate recovery specialists can access the financial position of the business to determine what options are available and appropriate”.

We are here to help, if you have concerns about your business, please do not hesitate to contact Nick or a member of our Business Recovery team, who will be able to assist with an initial free consultation.

 

Disclaimer

The information was correct at time of publishing but may now be out of date.

Business Recovery
Posted by Nick Brierley
3rd June, 2020
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