Creditors say they are owed more than £9m by collapsed Northumberland contractor Howard Russell Construction, according to newly published documents.
The Cramlington design and construction business appointed specialists from FRP Advisory in May, just months after posting a jump in turnover and hopes of future growth. The company had been involved in high profile UK and North East schemes including work at the North East advanced manufacturing hub IAMP and the City Gate offices at Gallowgate, Newcastle. Its most recent accounts predicted a big sales rise to £80m for 2023, based on its secured orders.
But a catalogue of challenges plunged the firm into financial difficulties before its eventual collapse, resulting in 45 jobs losses. The chain of events has now been revealed in a report by joint administrators Steven Ross and Allan Kelly of FRP Advisory. The report outlines how the company worked across the UK as a main construction contractor.
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It said: “While there were cash reserves and investments held by the company, current contracts profitability was severely impacted by the restrictions introduced as a result of Covid-19, Brexit and the increase in material costs.
“Furthermore, there were significant delays to some construction contracts which subsequently incurred large penalties. These penalties heavily impacted the profitability of these contracts. Additionally, there have been defect liability claims and counter claims made on larger completed contracts which significantly impacted the solvency of the company.
“The directors attempted to implement various turnaround strategies, however all attempts were unsuccessful. The directors therefore made the decision to approach FRP once they were aware that the company was insolvent. The primary cause of insolvency is attributed to the following matters: delays to the completion of construction contracts, incurring significant penalties, defect liability claims and counter claims on completed projects, general increases in labour and material costs, and Covid-19.”
A list attached to the report includes 174 creditors so far, with debts totalling £5.03m, but the company has yet to submit an official statement of affairs, which is awaited “due to the time spent gathering creditor and contract information”.
A separate list details the financial position so far, with creditor claims coming in much higher, including 208 firms that have submitted claims, totalling £9.09m. Some firms have put in claims more than double the amount including in the company’s list, and scores more creditors have yet to submit their claims, meaning the total could be much higher.
The administrators say that it is estimated that there will be sufficient funds available to make a distribution to unsecured creditors in due course, adding: “This distribution will be paid by a subsequently appointed liquidator, the costs of the liquidation cannot at this stage be estimated and therefore it is not possible to estimate the level of distribution that may be made”.
Secondary preferential creditors, are owed around £410,000 and administrators said they anticipated that secondary preferential creditors will receive a dividend.
