Business failures double in nasty November

Monthly construction sector administrations have surged with the highest total since March, according to the latest data from Creditsafe.

The 28 collapses recorded in November marked a sharp increase on October’s 15 failures, and was the joint-highest total since 31 in March.

There were also 28 failures in May and June this year.

The latest figures brought the year-to-date total to 266, identical to the figure for January-November 2024.

Small firms dominated the latest list. Seventeen employed fewer than five staff and seven had no employees below director level.

Just two of the fallen firms were large enough to file detailed accounts with Companies House.

Offsite construction specialist Merit Holdings Ltd – the main trading arm of Merit Group Services Ltd – ceased trading after entering administration.

James Lumb and Will Wright of Interpath were appointed as joint administrators on 18 November.

Northumberland-based Merit delivered modular construction projects across the healthcare, life sciences, education, battery technology and aerospace sectors.

The firm generated £2.3m in pre-tax profit from turnover of £86.6m in its most recent accounts for the year to 30 June 2024.

But the company suffered contractual disputes and delays on several large jobs in recent months, which severely impacted cashflow, the administrators said in a statement.

They added that pressure increased after the Merit group became subject to an unexpected winding-up petition, stalling new contract awards and delaying work on existing projects.

Directors explored refinancing and sale options before opting to place the business into administration after failing to find a solvent solution, the administrators said.

As a result, Merit ceased operations and most of its 340 staff were made redundant.

Family-run MCP Property Services was the other large construction-sector firm in November’s casualty list, although it was bought out of administration in a pre-pack sale.

The Hertford-based firm, established in 1978, specialised in repair and maintenance services for the social housing sector.

Its clients included Runnymede and Sandwell Metropolitan borough councils, as well as housing associations such as Peabody and L&Q.

MCP’s most recent annual accounts, covering the year to 31 March 2024, mentioned that four new contract wins helped turnover grow by a third from £15.7m to £21.1m.

But pre-tax profit fell from £296,710 to £226,210.

The firm employed a monthly average of 150 staff.

In the accounts, director Mark Gelder described “a significant growth phase for the business”, and said he envisaged “a period of stability” in the year ahead with an “extremely healthy” pipeline.

But in their statement of proposals, administrators from Begbies Traynor said MCP was reliant on a single customer for about half of its annual revenue.

“This customer decided not to renew their contract and the company ceased providing services to the client in April 2025,” they added, although action is ongoing to recover sums MCP claims it is due.

Subsequent cashflow issues placed MCP “under considerable financial strain”, said Begbies Traynor, prompting a review of operations that ultimately led to administration and a pre-pack sale for £92,500 to an unnamed company.

All 46 employees were transferred to the new owners under TUPE legislation.

Secured creditors include NatWest Bank. It is owed £137,500 in a floating charge related to a Covid-era CBILS loan but the administrators said that recovery “appears unlikely”.

In contrast, Cynergy Business Finance has been fully repaid the £130,980 it was owed.

Secondary preferential creditor HMRC is likely to receive some of the £992,415 it is claiming, the administrators said.

But unsecured creditors owed £1.7m, including supply-chain firms, are set to remain empty-handed.

“On the basis of current information it is anticipated that realisations will be insufficient to enable a dividend to be paid to the unsecured non-preferential creditors,” the administrators said.

Post-Budget worries

“The increase in firms going into administration is a reflection of current uncertain market conditions,” said Clive Docwra, managing director of consultancy McBains.

“Many firms have been running on tight margins due to continuing cost pressures, including increased employer NICs [national insurance contributions], while the uncertain economic climate is resulting in a reluctance by a number of investors to commit to major projects.”

This is having a knock-on effect along the construction supply chain and affecting contractors of all sizes, Docwra said.

He added that last week’s Autumn Budget “will put increased pressure on many companies with the further rises in the minimum wage”.

David Crosthwaite, chief economist at the Building Cost Information Service, echoed Docwra’s worries about higher labour costs after the Budget.

“Contractors, many of whom are already operating on wafer-thin margins, will have little choice but to pass on the increased employment costs in tender prices,” he said.

“This has already been happening as labour cost inflation caused by skilled worker shortages and the hike of (NICs) works through.

“You’d think the government would have learned a lesson from the fallout of higher business costs – i.e. the shrinking construction workforce and subdued output.”