Coronavirus Is Causing Big Bust Reduction

Central Building Contractors

In first month of the Covid-19 pandemic, the UK managed to avoid a deluge of company insolvencies - in fact the number of firms going bust went down considerably when compared to last year.

April 2020 saw the number of companies going out of business down by a third on the 2019, as government support packages have given companies vital headroom.

A total of 61 companies fell into administration during April 2020 compared to 91 in April 2019, according to analysis of notices in The Gazette by KPMG’s Restructuring practice. Meanwhile, March saw 135 administrations, compared to 116 in 2019. In total, there were 444 insolvencies during the first four months of 2020, down 5% from the 468 seen between January and April 2019.


 “Comfort can be taken from the fact that we haven’t yet seen the deluge of companies falling into administration that many predicted, as the breadth and depth of support measures available, coupled with a supportive lending community, have given organisations vital breathing space during the crisis.”

– Blair Nimmo 

Head of Restructuring, KPMG


Suspension to wrongful trading rules

“The proposed changes to insolvency legislation, which include the suspension to wrongful trading rules, are also likely to help relieve the pressure on directors, some of whom have chosen to stop production and/or enter hibernation where they may previously have had little choice but to appoint administrators," continues KPMG's Nimmo.


More companies fail coming out of a recession

Nimmo however warns: “The old adage that ‘more companies fail coming out of a recession than fail going into it’ will be front of mind for many executives who now are trying to forward plan their exit from lockdown.

"There remains a huge number of ‘unknowns’ which make planning for an exit particularly difficult – from how long it will take for customer demand to bounce back and minimising disruption across supply chains, to the cost of implementing social distancing measures and whether the government’s Job Retention Scheme will be tapered out as we head towards October."


Phased approach

Nimmo adds: “While recognising that things will not go back to the way they were overnight and that a phased approach will undoubtedly be necessary, businesses will nevertheless need to take care not to fall into the classic trap of scaling up too quickly.

“Many will have burnt through cash reserves during the lockdown period, and while some will have taken advantage of the various government support packages available, it must be remembered that at some point, loans will still need to be repaid – a burden which comes on top of having to finance any ramp-up in production, repay tax deferrals and re-engage staff who have been furloughed.

“Companies should therefore think about embedding as much of the cost-saving gains made in their initial crisis response as possible into their day-to-day operations, as well as opening dialogue with key suppliers and financial stakeholders on repayment plans that support a recovery on both sides of the table.

“Some organisations may also start to rapidly explore disposals of non-core or ageing assets as a means of generating cash.

“Finally, it will be essential to model the medium to long-term financial impact of a market that may ultimately operate on reduced activity levels, and importantly, assess the cost base required to support that, as it is highly unlikely to look the same as the pre-crisis operating model."



Central Building Contractors (Glasgow) Limited

Blair Nimmo and his colleague Geoffrey Jacobs were appointed as Joint Administrators of Central Building Contractors (CBC) on 29 April 2020.

Established in 1971, the company is a privately owned, family run Scottish construction company, providing a range of construction design, development and maintenance services throughout Scotland. Ot employed 159 people.

CBC had suffered from challenging trading conditions in the construction sector and delays in the commencement of a number of significant projects. At the time of the appointment of KPMG, in accordance with government’s guidelines, all projects had been closed for the previous 5 weeks.

It was not possible for the CBC to trade in administration and the Joint Administrators were required to make 148 employees redundant immediately following appointment, with 11 members of staff being retained to assist with the administration process.

The Joint Administrators are rapidly exploring whether an early sale of some of the business and assets can be secured. The Company’s assets include three freehold properties, numerous contracts, order book, work in progress and construction equipment.

Picture: Central Building Contractors had to close all its sites during lockdown - and now the company has gone bust.


What is wrongful trading and why does it matter?


The current insolvency rules provide that directors of limited liability companies can become personally liable for business debts if they allow the company to continue to trade once insolvent administration or liquidation becomes unavoidable. Under the current wrongful trading provisions found in the Insolvency Act 1986, upon concluding that there is no reasonable prospect of the company avoiding insolvent liquidation or administration, a company director has a duty to take every step to minimise potential loss to the company’s creditors.


With thanks to


Article written by Cathryn Ellis
15th May 2020


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