Posts Tagged 'insolvencies'

Something might turn up…

Now this is a word of warning for those of a nervous disposition……don’t read this! Why?

Well I could be writing about anyone you know in construction right now…..

I read the article The Eye Test in last Fridays ‘building’ magazine, page 42/43 if you happen to get a paper copy, or here’s the link if you subscribe.

It’s a message for all company directors out there, don’t take risks at the expense of the support of your creditors.

The gist of the case was about a property company continuing to trade beyond the point any reasonable person would, on the blind belief ‘that something might turn up’ and the consequences this had.

The thing is it really is quite a difficult call to make, as if you are certain you’ve got a deal that will make you a fortune, and you’ve got all your eggs in that basket, and bang! All of a sudden things don’t quite fall into place. Suddenly you could be in a very cold and lonely place! And who wouldn’t think…..something might turn up……..as invariably if you put the effort in, make a few calls, ask a few favours ………..it does. But be warned it might not, and there are consequences…..

The judgment in the case itself is a message to company directors, but the key principles apply to anyone involved in running a business these days when they get to that point of no return.

So the messages from the article that came out to me were:

  • Look after you creditors and their interests – surprising that to some people you might think
  • Monitor your cash flow intensely, identify any irregularities that highlight the company cannot make its payments by the due dates – basic common sense isn’t it?
  • Investigate all available options for putting the company back on track – and don’t delay in doing so, it takes time
  • Hold regular board meetings, and keep notes of why you have decided to act in that way, what facts did you have that made you take a particular decision – you’ll never remember in time to come.
  • Consider the need to keep all stakeholders in the business informed at the appropriate times – everyone has an interest in keeping the business alive
  • Don’t place orders for work when there is no prospect of you paying for that work – common sense again!
  • Don’t put personal or any other interests before those of the company – difficult one to judge but don’t go for short term greed

And………….don’t continue to trade on the basis that ‘something might turn up’…..

For anyone interested to read more on this, the case is Roberts vs Frohlich and if you do read it, it has some great insights into the way or industry works with developers and contractors jostling in the formation of contracts. It also has around paragraph 43 a great quote from the letter of intent and the problems of naming individuals in any such letter. Fancy naming the Chairman of an organization as the only person you could negotiate commercial matters with!

Couldn’t resist this one either……….there’s also a Spanner in the works too!

Calm before the storm…….

I don’t know about you but we’ve been rushed off our feet since we came back after the Christmas break and things have only really just slowed down for us – producing boq’s for contractors that is. Time to draw breath we think. Conversely our Consultancy site based QS services has been at a low level of activity for quite a while now, everyone getting by the best way they can.

But is it just me, or is there something in the air………things are about to get more, dare I say sinister this year?

Buildings headline news of insolvencies being down in January compared to last year is more optimistic news – sad news for those 205 companies and all their employees mind, not a great start to the New Year for them.

But I think things are about to take a turn for the worse…….. (and I’m not the only one, take a look at Neil Edwards blog for some words of warning too)

Now I normally look on the bright side when I can, but I can hear too many alarm bells starting to ring now, meaning it’s going to get tough and nasty for us all. And soon.

Fuel prices, raw material prices, interest rates, extended payment periods, government spending cuts, increases in national insurance contributions….I feel like I could go on ……the thing is nothing is going to get any cheaper.

Where is the pressure for everyone?

To reduce costs, and we just cannot do it any longer…..…there’s only one direction for costs this year and that’s upwards.

What has everyone been doing this last year or so? Living off the higher priced projects on the past, and taking advantage of their supply chain reducing its costs over the same period.

What is happening now? Prices are still being submitted at low rates anticipating that things will be bought even cheaper later on.

The bad news………….It’s just not going to happen.

The supply chain is at rock bottom and cannot go any lower. Look also at the Construction Products Association recent press release ‘Sharp Material Prices Add to Construction Woes’. I predict some serious repercussions for lots of organisations as a result. So now is the time to be vigilant and if the bank says that client is a bad bet, you know what? They are probably right.

It really is the calm before the storm………..


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About Me

I’m now the Managing Director of Mynott Associates Limited my own specialist measurement business. I’ve been in the industry all of my life since I left school. My first job was with Bovis Construction as a management trainee where I trained to become a quantity surveyor. I’ve worked for contractors all through my career, I am FRICS, FCIOB and MCIHT qualified and act as an RICS assessor. I’m also a keen Arsenal supporter having followed them from a young boy

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