The UK economy experienced stagnation for the second consecutive month in July, with zero growth following June’s flatlining performance. The Office for National Statistics (ONS) reported that while services output saw a slight increase, it was more than offset by declines in production and construction. A similar trend has been observed over the period of August. 

This economic slowdown might be a sign of a tougher second half of the year. Persistent weaknesses in key sectors like manufacturing and construction are notable. Although interest rates are at a turning point, further cuts may not occur until later in the year, and there’s a need for improved demand stimulation and business confidence.

In a time where the UK’s economic momentum has faltered after the general election, the construction sector’s output continues to decline, adding to its stagnation. The possibility of a September rate cut is uncertain, with some rate setters cautious about inflation pressures.

This also suggests that construction insolvencies may rise further in the last quarter, with the following implications: 

Reduced Investment: Economic uncertainty and anticipated tax rises may lead to decreased investment in construction projects. Lower investment can reduce project volumes and revenue for construction companies, heightening the risk of insolvency.

Liquidity Issues: With the Bank of England’s high interest rates impacting borrowing costs, construction firms with significant debt may face liquidity issues. Higher borrowing costs can strain cash flow and increase the risk of insolvency for those unable to manage their financial obligations effectively.

Increased Insolvencies Among Smaller Firms: Smaller construction firms, which often have less financial buffer and are more sensitive to economic fluctuations, may be disproportionately affected. These firms might struggle more than larger counterparts to absorb financial shocks, leading to higher insolvency rates.

Potential for Consolidation: As weaker firms face insolvency, there may be opportunities for consolidation within the sector. Larger or financially healthier firms might acquire distressed assets or companies, potentially stabilising the sector in the long term but leading to short-term increases in insolvency filings.

Construction News | Perthshire’s Hadden Construction Goes Under

Perthshire’s largest main contractor, Hadden Construction entered administration on 10th September. Based in Aberuthven, the company cited inflationary pressures as the reason for this insolvency. This development has halted work on its sites and resulted in the redundancy of 66 employees.

Founded over 30 years ago in Crieff, Perthshire, Hadden Construction moved to its current headquarters in 2000. It is currently unclear whether its parent company, Hadden Construction Holdings Ltd, is also facing administration, though it is still listed as trading on the Companies House website.

Hadden Construction struggled with several challenges in recent years, including rising materials prices, increased labor costs, and supply chain disruptions. Despite reporting a pre-tax profit of £230,000 on a turnover of £30.2 million for the financial year ending March 31, 2023, the company faced difficulties. Director Anne Nicol noted that while turnover and profit had returned to pre-Covid levels, the pandemic caused delays both on-site and during preconstruction.

The firm specialised in construction, homes, and general works, taking on projects such as RAAC remediation. It recently secured contracts for a £4 million student accommodation refurbishment at the University of Stirling and a £6 million traveller accommodation scheme near Perth. Additionally, it earned positions on the Scottish Procurement Alliance’s £100 million refurbishment and modernization framework and Scotland Excel’s new-build residential framework.

Consultancy Alvarez & Marsal, represented by Ben Cairns and Jonny Marston, has been appointed to manage the administration process. They aim to oversee an orderly wind-down of the firm’s operations. 

CG Godfrey Limited Enters Administration

C G Godfrey Limited, a Lincolnshire-based construction firm entered administration two weeks back. Duncan Beat and Andrew Watling of Quantuma were appointed as Joint Administrators at the end of August.

Founded in 1973 and based in West Pinchbeck, Spalding, C G Godfrey specialised in civil, mechanical, and electrical engineering services, with a focus on vacuum sewerage systems and deep drainage. The company served a diverse client base, including local authorities, private clients, water companies, and district and county councils.

Despite a turnover of £4.8 million in 2023, C G Godfrey faced significant financial difficulties due to a loss of approximately £300,000 from two contracts. This shortfall created insurmountable cash flow issues. The firm’s 23 employees have been made redundant. The focus for the administrators now is to support those affected by the job losses during this challenging period.

Quantuma initially engaged in July 2024 to advise the company and conducted a marketing exercise to find a buyer for the business or its assets. Although several expressions of interest were received and NDAs were signed, no viable offers emerged. The company lacked the working capital necessary to continue operations, leading to its entry into administration and immediate cessation of trading.

Construction News | Stone Specialist Levantina UK Files for Insolvency

Levantina UK, a subsidiary of the global Levantina Group, is known for its expertise in extracting, producing, and distributing natural stone products, including marble, granite, and limestone. Serving over 350 B2B clients in the UK, such as stonemasons and kitchen and bath studios, Levantina UK focuses on semi-finished stone slabs.

The stone company with operations in Basingstoke and Rotherham entered administration, primarily due to declining demand in the UK’s housing and renovation sectors.

Despite reporting a turnover of £5.1 million for the year ending December 31, 2022—an increase from £4.4 million the previous year—the company’s post-tax losses grew from approximately £538,000 to nearly £723,000. The firm’s assets were valued at just under £3.4 million, while its liabilities totaled around £5.8 million.

Interpath Advisory have been appointed as joint administrators. They are working to maintain operations at the Basingstoke and Rotherham sites and have retained the company’s 12 employees. The wider Levantina Group remains unaffected by the administration.

To find similar businesses in distress and learn more about capitalising on them at the right time, visit Administration List today.