Subbies are owed £25m by Connaught

Grant Prior 11 years ago

Subcontractors and suppliers caught by the collapse of Connaught into administration are owed £25m.

Administrator KPMG has now confirmed to the Enquirer the level of trade debt owed by Connaught Partnerships.

Companies owed cash are likely to remain unpaid despite the ongoing sale of the business.

KPMG has sold the majority of contracts to Morgan Sindall for £28m and is holding talks with councils and housing associations across the country about the remainder as it continues to trade the company as a going concern.

The mass migration of Connaught’s contracts is expected to keep job losses at site level down to a minimum.

But Connaught’s office staff could see large redundancies while trade contractors and suppliers will lose out.

One insolvency expert told the Enquirer: “Rival contractors will come in and take over jobs but they won’t pick-up the bills left unpaid by Connaught.

“That is an issue for the supplier and the administrator so trade contractors usually lose what they haven’t been paid. That’s the system I’m afraid.”

Other experts are warning that the collapse of Connaught could be the start of a series of construction failures as Government spending falls.

David Hudson, Partner at Baker Tilly Restructuring and Recovery LLP, said: “The impact of the spending cuts with Connaught not only affected the building contractor itself but subcontractors and suppliers to it.

“Many contractors took advantage of TTP (Time to Pay) with HMRC during the down turn. Some may have also employed the use of CVAs (Company Voluntary Arrangements) to allow continuation of trade and for the survival of the business.

“However, due to the strain on HMRC and creditors, HMRC is coming under stricter guidelines in a situation where a company falls short due to default.

“The fate of Connaught sends a strong message to suppliers to the public sector and we expect to see more cases to follow.”

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