With the country in the midst of the worse economic decline for decades, insolvency is often in the headlines. The construction industry has seen more than its fair share of insolvencies, with a number of high profile companies falling victim to the recession. We have seen some big names disappear (David McLean, Mann Construction, Pettifer Construction to name but a few). Most recently, Ashford Construction and William Verry both went into administration. Experts predict that, as with the recession in the 1990s, things will get worse before they get better, as the country comes out of recession.
To try and counter this, to get UK businesses through the recession and out the other side, stronger and more successful, the Government announced (in the April 2009 budget) that there would be a consultation on business rescue procedures. Its paper, “Encouraging Company Rescue” was published last month. The consultation closes on 7 September 2009.
There are two main themes to the proposals:
- Promoting the use of company voluntary arrangements (CVA), to give companies the protection of a moratorium against creditor action while they formulate CVA proposals.
- Facilitating loans to companies in administration or CVA to assist their rescue, by giving the repayment of such loans priority over existing creditors.
In the meantime, there are some signs of hope. Activity in the house building sector is starting to increase and sales are on the rise; even though rumours have started suggesting it is a potential target for Government cuts, work on Crossrail has started; and construction at the Olympic site is progressing ahead of target.