Avonside owed more than £17m to unsecured creditors before it collapsed earlier this month, a new report reveals.
The firm had struggled with the impact of COVID-19, which was accentuated by a “margin squeeze, the impact of underperforming divisions and financial reporting issues”, as initially noted by its administrators, Begbies Traynor, who were appointed two weeks ago.
The new report states that the firm owed £17.3m to unsecured creditors when it went under, which the administrators suggested would not be paid back. In its first report regarding the administration process, Begbies Traynor – which had also described Avonside as the UK’s largest roofing contractor – said the firm had “insufficient property to enable a distribution to be made to unsecured creditors”.
Significant expansion of the firm was also partly blamed for its failure, as a set of acquisitions led to widespread “integration issues” at Avonside. In 2003, when the firm was bought out by its former executive chairman Tony Burke, it had around 150 members of staff and 11 branches – by the time of its collapse, it had 37 branches and 350 staff members.
The administrators have managed to sell 10 of Avonside’s 37 branches, saving around 180 jobs in the process. They had initially estimated 250 jobs would be lost.
Business administrations have soared in the past year – construction-related firms have struggled to deal with mounting cost pressures as government support measures introduced during the COVID-19 pandemic have been lifted. Although fewer firms collapsed in August this year than in July, the 20 recorded was still three more than in the same month for 2021.
Amid the current cost-of-living crisis, Oliver Haunch, a partner at audit advisers Grant Thornton, previously told Construction News that businesses were experiencing “an operational cost crisis”. He added that this difficulty in running everyday business activities was caused primarily by rises in the cost of raw materials and energy, in addition to labour inflation.