Sorry to start on a gloomy note, but I’m dismayed to read on a regular basis that main and specialist
contractors are going under or in difficulty. These are long-standing companies whose expertise and skills are a great loss to the construction sector, at a time when skill shortages are becoming more obvious and when we need to attract a new and more diverse set of people into the industry. This mirrors the economic uncertainty and challenges of recent times with a softening in activity and delays in investment for large construction projects. Looking back to the start of 2018, the steel sector and others warned the Government about “the Carillion effect”; that the true ripple effect on the industry as a whole would not be felt until 12 to 24 months down the line, I think we are seeing this play out now.
We must focus on financial due diligence, good housekeeping and contract management. We must stand back on receiving an enquiry and think about whether we want to work for that company. What is the financial standing of my client, perhaps I can get advance payments, offer a retention bond or have monies set aside in trust in an escrow account or project bank account? Can I get credit insurance for the main contractor (and if not, why not?) Who is the main client on the project? When are payments due? Will payments flow through properly and when will my retention be released? These are the sort of questions and assessments for a go/no-go decision and it’ll probably avoid having to face the aggravation of sorting it out after cash has left the business. Continue Reading →