Navigating Contractor Administration in the UK Construction Industry cover art

Navigating Contractor Administration in the UK Construction Industry

Navigating Contractor Administration in the UK Construction Industry

Listen for free

View show details

About this listen

 Episode 5 - Patricia Haywood, founder of Haywood Commercial, a rapidly expanding construction contract advisory firm in London, addresses the critical issue of construction companies going into administration on her podcast, aimed at CEOs in the construction sector. Highlighting the current distress within the industry, where approximately 12% of UK construction companies, equating to around 80,000 businesses, face financial difficulties due to factors like high interest rates, inflation, cash flow problems, and low profit margins. Patricia discusses the process and implications of administration, where a licensed insolvency practitioner, referred to as Mary, steps in to potentially rescue the business. She advises subcontractors on immediate actions, such as contacting the insolvency practitioner, understanding their rights under the Corporate Insolvency and Governance Act, and emphasizes the importance of maintaining thorough documentation and a strong understanding of their contracts to navigate through these challenging times efficiently. Takeaways: About 12% of UK construction companies are in financial distress, influenced by high interest rates, inflation, cash flow issues, and low profit margins, impacting both small and large businesses. When a construction company enters administration, a licensed insolvency practitioner is appointed to manage the company with the aim of rescuing the business, involving a statutory moratorium to provide breathing space for strategic planning. Subcontractors should immediately contact the insolvency practitioner, ensure all documentation and invoices are in order, and familiarise themselves with the Corporate Insolvency and Governance Act to understand their rights and obligations during the administration process. Companies should conduct due diligence on partners, maintain robust payment processes, and build a cash reserve to mitigate the impacts of potential administration scenarios, emphasising the need for proactive financial and contract management. In this episode: [00:36] Patricia Haywood introduces herself as the founder of Haywood Commercial, sharing her background as an award-winning entrepreneur, lawyer, and her extensive experience in the construction industry. [01:08] The focus of the podcast is revealed: leveraging construction contracts for improved profit margins and sustainable cash flow, specifically aimed at CEOs in the construction sector. [01:40] Discussion on the distress within the UK construction industry, with about 12% of companies facing financial difficulties, translating to roughly 80,000 businesses. [02:12] Patricia outlines the main causes of distress in the construction industry, including high interest rates, inflation, cash flow problems, and low profit margins. [03:29] The real-world impact of a construction company going into administration on projects, employers, and subcontractors is examined. [04:03] Detailed explanation of what administration entails for a construction company, including the role of a licensed insolvency practitioner. [05:07] The significance of the statutory moratorium period during administration for strategic planning and potential business rescue. [06:50] The concept of the "lucky window" and the challenges of finding a financial savior for construction companies due to low profit margins. [07:58] The continuation of business operations during administration and the reality of the challenges faced due to slim profit margins. [08:23] The process of moving from administration to liquidation and the role of converting assets to cash to address cash flow problems. [10:09] Insight into the common financial misstep of investing in assets, which can exacerbate cash flow issues. [11:09] How to recognise signs that a company is heading towards distress and the importance of due diligence. [15:49] Immediate steps subcontractors can take if their main contractor goes into administration, including contacting the appointed insolvency practitioner. [17:17] The importance of familiarising yourself with the Corporate Insolvency and Governance Act and understanding its implications on contracts during administration. [18:02] Advice on reviewing and understanding the specifics of construction contracts to navigate administration effectively. [19:16] The broader impact of a main contractor's administration on the project hierarchy and the importance of collaborative efforts among subcontractors. [20:54] Strategies for subcontractors to enhance their resilience against future instances of main contractors going into administration, including financial preparedness and contract management. Resources Haywood Commercial UK Connect with Patricia on LinkedIn Corporate Insolvency and Governance Act 2020 Quotes "In the world of construction, liquidity is not just a financial metric; it's the lifeblood that keeps the project and your business flowing smoothly." - Patricia Haywood, Host "Facing administration is ...
No reviews yet