Painting contractors play an essential role within the construction industry, providing an aesthetic and protective finish to the surface of new buildings as well as maintaining the appearance and integrity of existing structures. The sector derives approximately 41.5 percent of its annual revenue from new house build projects, and about 40 percent from non-residential and commercial sites such as schools and hotels.
Unfortunately however its intrinsic relationship with the construction industry has had an adverse impact on its performance; demand for painting contractors has suffered as the recession causes spending on new construction projects to dwindle. Similarly, investment in maintenance and repair work has lessened in recent years, and a number of contractors have struggled as a consequence.
The good news is that although the most recent Construction Trade Survey from the Construction Products Association (CPA) found that conditions in the UK building market were only likely to worsen throughout 2012, the first quarter of this year brought a more optimistic outlook for the contractor sector. The latest State of Trade survey from the National Specialist Contractors Council (NSCC) indicated that a significant number of contractors have experienced improvements in trade: 44 percent of those companies surveyed had seen an increase in enquiries in Q1, up from 32 percent last quarter, and 37 percent reported an increase in orders, up from 30 percent.
In spite of the cautious optimism prompted by these trends, the majority of those contractors surveyed are still planning less than three months in to the future. Confidence is at best, shaky, and late payment continues to be a serious issue. Indeed only three percent of specialist contractors say that they are paid within 30 days – despite the Government drive to improve late payment, the development of the Prompt Payment Code (PPC) and various initiatives from the Department of Business, Innovation and Skills (BIS) to promote the advantages of paying on time.
It is not surprising, therefore, that some companies find themselves under pressure, and one that found itself with cashflow problems that proved to be insurmountable was Lincoln-based painting contractor Else Northern Limited, for whom SFP was appointed Administrator on April 24, 2012.
The firm had an established track record spanning eight decades, and had been serving both the public and private sectors at a nationwide level, painting domestic, commercial and industrial buildings since its inception in 1926. Its client list was impressive, undertaking projects for Local Authorities, the National Health Service (NHS) and even the Ministry of Defence (MOD), as well as commercial contracts for the retail trade, and it specialised in the application of anti-carbonisation coatings for the protection of concrete, coatings for food hygiene environments, and specialist coatings for sports and play surfaces.
The contractor had an annual turnover of approximately £1.5 million but accrued debts of almost £300,000, including a significant sum owed to Her Majesty’s Revenue and Customs (HRMC). The inability to be able to service these debts led to problems, and ultimately the appointment of SFP’s Daniel and Simon Plant – both licensed members of the Insolvency Practitioners’ Association – as joint Administrators.
Daniel Plant, Group Partner at SFP, says that with the construction industry still being hugely affected by the troubled economy, insolvencies are an unfortunate matter of fact. Although turnarounds and recoveries are sometimes possible, Else Northern’s troubles proved terminal: “The management of cashflow is a critical issue for business survival,” Daniel explains, “and was a major cause of Else Northern’s decline. Whilst we have completed a successful sale of the company’s assets, we may have been able to do more had the management consulted with us sooner, before it was too late.”