Revealed: The 31 firms that went into administration in February

The number of administrations recorded in the construction industry last month was at its highest level since the start of the pandemic.

In total, there were 31 administrations in the construction industry in February 2022, the biggest total in nearly two years (see full breakdown below).

According to data collected by Creditsafe, February saw the highest number of administrations recorded in the construction sector since March 2020, when the pandemic first took hold in the UK and 32 firms went under.

February 2022 also saw a 160 per cent rise on January, when only 12 construction firms fell into administration. However, January marked a seven-month low and administrations were climbing gradually before that. There were 20 in December, 19 in November and 23 in October.

DRS Bond Management director Chris Davies said that the increase in administrations showed that the industry was seeing the “full effects” of the furlough scheme, which was phased out, as well as the end of tax breaks set up by HMRC, which allowed VAT payments to be deferred.

Davies said: “When you consider that construction was the largest recipient by volume of applications of coronavirus loan money, and the second largest by volume of cash of coronavirus loan money, that means that a good number of even those bounceback loans would have been construction companies.”

A major construction firm that sunk into administration last month, taking along its subsidiaries, was South West giant Midas group. The administrators’ report revealed that the firm faced cashflow challenges even before the pandemic. COVID and delays to contracts eventually meant Midas ran out of money and was unable to pay its subcontractors. At the time of administration, Midas owed £22m to creditors.

Davies said that the pandemic had rendered the construction industry a “two-tier economy”, with some firms enjoying good cash reserves and others already in the red by the time coronavirus hit the UK.

With the added layer of inflation in the economy and high demand for construction work, companies with strong cash reserves could actually make more money than they had going in, Davies added. However, firms struggling for cash only need one or two jobs to go badly before they potentially run out of money.

“They went into COVID carrying too much cost and too many jobs that were going to burn. And they’ve come out the other side, or not, as the case may be, either very weak, or they’ve gone bust,” he said.

Davies predicted that the rising trend in administrations would continue during the months ahead as the construction industry reeled from a “COVID hangover”. How long this would last, he said, was based on how quickly firms got paid and how slowly they paid their creditors.

Data provided by Creditsafe