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Birmingham Post
Birmingham Post
Business
Tom Keighley

Norstead collapse leaves more than 300 companies owed millions

Mechanical and electrical engineering construction firm Norstead owed about £6.5m to creditors when it collapsed into administration, new documents show.

An administrators' report shows that the Killingworth-based operation owed sums to more than 300 suppliers and partners when insolvency experts at FRP were called in in early March, making 52 people redundant. The firm, which had operated across the country from its Newcastle and Maidenhead bases, was made insolvent by the failure of its sister company Metnor Construction and the pulling of funding by a major backer of the wider Metnor Group.

Discussions had taken place with Norstead's management team about a potential acquisition, and there had been interest from another North East-based buyer interested in expanding into the firm's market which included design, installation and mechanical and electrical services. Despite extensive talks with Norstead's customers about replacement contracts, a key funder of the potential management deal backed out and directors were forced to appoint administrators.

Read more: Gateshead construction firm Meldrum Group highlights strong year

As well as the impact of Metnor's demise, the report from joint administrators Steven Ross and Allan Kelly indicates that Norstead, which had been profitable, faced significant challenges including increased labour and materials costs and the damage wrought on the construction sector by Covid. FRP also explicitly noted the effects of Brexit.

The administrators, who are also handling the affairs of Metnor Group and Metnor Construction, wrote: "FRP were initially engaged in an advisory capacity and to undertake an accelerated merger and acquisition (AMA) process with a view of selling the company's business as a going concern. In order to facilitate this, a joint letter of engagement was agreed with FRP and the company to instruct Leslie Keats, specialist quantity surveyors, to review any outstanding contracts, potential recovery action and any value in the novation of ongoing contracts.

"Following the AMA process being launched, there were several interested parties who expressed an interest in purchasing the company as a going concern. However, as further financial and contractual information were produced and reviewed by Leslie Keats and the interested parties, all parties formally withdrew their interest. The directors resolved to place the company into administration on February 28, 2023."

Amounts of more than £108,000 owed to employees and about £50,000 to HMRC are expected to be paid in full, and administrators expect to be able to make a distribution to unsecured creditors. Share capital of the firm's shareholders totalled about £6.03m.

Norstead had been involved projects for a broad range of customers including the likes of NHS and John Lewis. It had played a role in building Ikea's Greenwich store; the Royal College of Art's Dyson Building which includes on display mechanical and electrical engineering components for teaching purposes, and work on The British Museum.

As recently as last year had hailed record growth amid new clients wins totalling £23m for 2022. The most recent accounts available for the business - to the end of 2021 - show turnover of £20.3m and operating profit of £50,000. In 2020 Norstead made an operating loss of £1.1m.

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