MECHANICAL AND electrical services specialist business, Michael J Lonsdale’s administration has raised fears of subcontractor losses.
The £250 million turnover company formally appointed administrators from Begbie Traynors this week on 2 October 2023. Michael J Lonsdale employed over 300 staff as well as many self-employed workers.
In a letter sent to staff, the directors, two of whom say they are personally owed £50m, explained that despite weathering the challenges of Brexit and the pandemic, “the ongoing conflict in Ukraine has added further strain, with surging inflation, workforce shortages, project delays, and supply chain disruptions, ultimately culminating in financial difficulties for the business.”
This meant the company could no longer depend on credit being available, creating the need to pay for procured goods immediately, which, the company says, was “unsustainable” for a business of its size.
In a pointed addition to their explanation of the circumstances leading to its collapse, the company’s directors bemoaned the “aggressive commercial tactics employed by certain general contractors”, which added to the firm’s difficulties.
In the letter, redundancy and notice arrangements were outlined for employees to receive final payments. However, subcontractors owed money by the firm will need to submit claims to the administrators to have any chance of recovering monies owed by the firm.
Mishcon de Reya, Construction Group Partner at lawyers, Marc Hanson comments: “There are increasing concerns as to the health of other contractors who might have agreed fixed price contracts during COVID-19 and who have been suffering from high inflation following the war in Ukraine.
“High interest rates and the lack of credit are also having a significant detrimental impact on contractor cash flows.
“One area of focus will be on whether delays in payment by main contractors (as alleged by MJL) played a major part in MJL’s insolvency. The British Property Federation (representing the major UK property firms and institutions) have this month produced a fair payment charter that includes recommended contract clauses that would require main contractors to be more transparent about how quickly and fully they pay their subcontractors.
“In the short term, MJL’s insolvency will likely drive inflation for M&E work and will drive increasingly risk averse behaviour from main contractors.”
Enquiries about the Michael J Lonsdale administration can be sent to the Begbies Traynor administrators: Jeremy Karr, Jamie Taylor and Domonik Czerwinkie by email: firstname.lastname@example.org; by telephone on 01702 467 255; or by post to 1066 London Road, Leigh-on-Sea, Essex SS9 3NA.
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