Newspaper article The Journal (Newcastle, England)

Sudden Upheavals Can See the Building Tumbling Down

Newspaper article The Journal (Newcastle, England)

Sudden Upheavals Can See the Building Tumbling Down

Article excerpt

Byline: By Rebekah Ashby

Two building firms ( which had been running for more than 120 years between them ( have collapsed in as many months while a 101-year-old housebuilder was last week snapped up by an Irish plc. Rebekah Ashby reports on the recent loss of homegrown businesses in the North-East's construction industry.

First to go was Northumberland's Stephen Easten. The builder ended 100 years in business owing millions of pounds among hundreds of creditors.

The Cramlington firm plunged into administration 10 weeks ago after a dispute with a client caused irreversible cash-flow problems.

And almost two weeks ago, a creditors' meeting revealed the true cost of the collapse to the North's construction supply chain ( about 500 to 600 creditors are owed between pounds 3m and pounds 4m altogether.

County Durham-based Esh Group, which has increased turnover to pounds 100m and its workforce to 1,000 in just six years, bought Stephen Easten's assets, its HQ at Northumberland Business Park, near Cramlington, and took on 105 workers.

Just over a month later, about 250 workers were made redundant after an ambitious and fast-growing construction company hit cash-flow problems.

Most of the 285 staff at MMP Group, of Newton Aycliffe, County Durham, were made redundant as the company went into administration.

Just weeks earlier, its boss spoke of increasing its sales from pounds 30m to pounds 50m over the next year.

Research director at Wise Speke, Michael Parkinson, said: "The construction market is always competitive ( that's just the nature of it ( and the margins, even in the best-case scenarios, tend to be around 2% to 3%.

"Quite often, it only takes one or two bad contracts to ruin everything, particularly for a relatively small builder.

"Construction companies often get paid up front by their clients and use a lot of sub-contractors and don't pay them until a lot later.

"They sit with quite big cash balances which can be quite misleading. If they are running into a problem, it's quite a long time before they run into a cash problem and by then it's too late.

"Because of the cash situation they [construction companies] can grow very quickly, so they can find the growth and the real fast-growing ones can some unstuck."

Director of Constructing Excellence in the North East Catriona Lingwood said: "If one company goes down, it can have a knock-on effect and the financial institutions can get a bit tetchy about who they are lending money to and that often has an effect on the whole sector."

But it's not just collapse that's affected the sector, it's also lost a homegrown home builder to an Irish plc.

The Journal reported last week that century-old North builder Bowey Homes had been sold to an Irish plc with ambitious aspirations to compete with the region's housebuilding heavyweights. …

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