Government shouldn't let Wrekin Construction go to the wall
On the face of it, the decision to take Wrekin Construction into administration on the same day that it received orders worth £50 million looks like a bad one by the bank.
For the want of two or three million pounds, RBS has chosen to take down a firm with 600 employees, a healthy overdraft facility and assets worth hundreds of millions of pounds.
Before laying into the banks its worth seeing the other side of the story. Contractors who are themselves facing penury and business extinction are unlikely to show much sympathy for the complaints of their debtors – and who can blame them?
But still, the fact remains that a company that was still bringing in big orders – and delivering them, even if contractors weren’t paid – has been taken down while it is trading strongly. Obviously something is very wrong in the finances of a company that has unpaid bills of millions of pounds owing to the contractors that rely on it for their survival. But the directors will likely point at an overdraft limit that in more happy economic times would have been expected to cover the payments.
Even the administrators themselves admit the company had a good track record of getting contracts – no mean feat in the most difficult property market since superlatives began. So while the creditors need to be paid, is putting the survival of the debtor at risk the best solution?
More importantly, even the dispassionate numbers do not seem to support administration. To recover this money, the taxpayer-owned bank is risking even higher costs to the public purse if it ends up in redundancies.
This is a microcosm of what is happening with other firms across the UK – particularly temporarily struggling manufacturers like Jaguar Land Rover. In Jaguar Land Rover, again we have a firm that has shown it has a future that is not only viable, but profitable, if it is only given the chance to overcome its temporary issues.
The reason why the Government needs to act over JLR is not because of the benefit to the people – although there are many. The social cost to the West Midlands of allowing a company like JLR to collapse would be appalling.
But this is not a socialist for-the-greater-good appeal to the Gvernment to pour money into keeping people in a job. Industry isn’t, and shouldn’t be, a machine where you shove money in one end and get society out of the other. But in cases like these, it doesn’t even make sense in terms of pure monetary profit and loss to insist on taking companies to the wall.
It’s about cold hard facts and cold hard cash – things you’d hope politicians would be au fait with. The Government has to realise that there are times when it makes perfectly good business sense to make the right decision for society.
