Wrekin Construction in administration as RBS pulls funding support
A major West Midlands construction firm has been forced into administration on the same day that it won orders worth £50million after RBS withdrew its financial support for the company.
Wrekin Construction Group, which employs up to 600 workers at its headquarters in Shifnal and four regional offices across the UK, was taken into administration by the bank after it received a winding up petition from third parties who had not been paid for projects.
The company is believed to have owed up to £3 million to various contractors.
But directors said the firm – which has received orders worth about £40 million since the start of 2009 alone – was being dragged under unnecessarily by the bank at a time when it was still bringing in big contracts in the worst property market in living memory.
On the same day it was taken into administration, the firm said it had received confirmation of two new orders valued at a total of £50 million and the firm still has a significant margin on its overdraft facility and a total order book worth hundreds of millions of pounds
A spokesman for the firm said the bank’s actions had put people’s jobs at risk unnecessarily, and would end up costing the taxpayer-owned bank more than it would recover.
He said: “Wrekin had an overdraft facility of £4.25 million and we were overdrawn by £2.8 million pounds. However the winding-up petition has resulted in the account being frozen.
“The current order book up to the beginning of March 2009 was £40 million for the calendar year. Today Wrekin has received confirmation of two new orders each valued at £5 million a year for the next five years.
“As a result of this administration the taxpayer may have to make redundancy payments of £2.5 million and there will be ongoing employment costs for more than 500 employees.”
Investigators from accountants Ernst & Young were on site at the company’s headquarters on Tuesday, and they said the firm had “run into financial difficulties as a direct result of the economic downturn, despite having a successful track record of winning a number of new contracts worth a significant value”, and there had been a number of winding up petitions made.
A day before the company collapsed, it announced it had been awarded a contract by Defence Estates to carry out construction work at RAF Menwith Hill in Yorkshire to build new maintenance and administration facilities. Work on the RAF site was set to start later this month.
But the firm had left many aggrieved contractors in its wake. Huddersfield pavement worker Ashley Browitt told a local newspaper earlier this week he had been left with an unpaid bill for more than £16,000 by Wrekin after repaving the town’s central square.
Conservative MP Mark Pritchard, whose constituency takes in Wrekin Construction’s headquarters, said the company had been forced into administration because of RBS’s “inflexibility” in releasing funds.
RBS which has a majority share owned by the taxpayer and Mr Pritchard said some of the blame had to be apportioned to the government.
He said: “This is a long-standing and successful company with a large order book which has been driven into administration by the inflexibility of RBS.
“Some of the blame has to fall on the doorstep of 10 Downing Street, given the Government’s majority shareholding in RBS.”
The MP said the administration had been caused by RBS not releasing funds for cashflow even though the firm had an order book he said was worth tens of millions of pounds.
