In this post, we’ll go over the CMA’s provisional discovery of illegal cartels in the industry, Urbn Construction, a Plymouth-based firm, has gone bankrupt owing more than £3.5 million, building safety remediation work is being negatively impacted by the construction industry’s “race to the bottom,” according to industry experts, and brickbats keep on coming for the construction industry.
CMA identifies unlawful cartels in construction industry
Original Source: CMA provisionally finds illegal cartels in construction industry
The CMA believes 10 construction firms illegally colluded to rig demolition and asbestos removal bids.
The Competition and Markets Authority (CMA) has provisionally decided that the corporations colluded on prices through illegal cartel agreements while bidding on contracts. These bids were rigged to fool the customer into thinking they were competitive.
One or more construction businesses collaborated to submit low-priced bids to lose the tender. Cover bidding might lead to higher rates or lower-quality services.
The CMA proposes fining the companies if it finds they broke the law.
The CMA has tentatively established that 7 of the enterprises were involved in arrangements where the ‘losers’ of contracts were to be reimbursed by the winner. In one case, compensation exceeded £500,000. Some companies used fake invoices to cover unlawful activity.
The CMA has found that collusion affected 19 demolition contracts in London and the Midlands, including Bow Street’s Magistrates Court and Police station, the Metropolitan Police training centre, Selfridges, Oxford University, shopping centres in Reading and Taplow, and offices on London’s Southbank. Not all organisations and contractors that bid on these projects colluded illegally.
Brown and Mason, Cantillon, Clifford Devlin, DSM, J F Hunt, Keltbray, McGee, and Scudder admitting to bid rigging between 2013 and 2018.
Erith and Squibb haven’t acknowledged to bid manipulation, hence they haven’t infringed the law.
Michael Grenfell, CMA’s Enforcement Director, said:
Construction is vital to Britain’s economy. Bid rigging may lead to bad transactions that cost firms and taxpayers money.
This is unacceptable, and the CMA will issue sanctions.
The CMA’s conclusions are tentative, thus no corporation has breached the law yet. The investigation’s conclusion will also decide fines.
The CMA’s “Cheating or Competing” programme helps firms discover, report, and discourage illegal anti-competitive behaviours such market sharing, price fixing, and bid-rigging.
Urbn Construction, a Plymouth company, fails with debts of more than £3.5 million
Original Source: Plymouth firm Urbn Construction goes bust owing more than £3.5m
Plymouth construction company goes bankrupt owing more than £3.5m. Urbn Construction Ltd, situated in Burrington Way, went into insolvency in May 2021, and liquidators have revealed its debts.
Companies House documents show 200 cash claims, mostly from construction firms. Urbn Construction had $56,876 in assets, but after costs it had $16,090.
The corporation was owing almost £3.5m. Even HMRC, a favoured creditor, won’t get the whole £462,952 it claims.
An annual report for Urbn Construction, in creditors’ voluntary liquidation, indicated that millions of pounds in funds owing to the firm cannot be retrieved. This includes £143,232 in nook debts that were “heavily challenged” and cancelled off.
Money was also held back as “retentions,” a standard practise in the construction sector when payment is postponed until a task is done. Urbn Construction retained £1,141,242. Liquidators’ debt recovery experts judged the debts “uneconomical to pursue.”
Work in progress for £1,440,000 couldn’t be completed due to unfinished contracts. The report added, “The contracts were assessed in the liquidation and it was determined that completing any outstanding work in progress would not be economical.”
Employees were due £22,231 in wage arrears, holiday pay, and unpaid pension payments, but unsecured creditors were owed $2,956,127. The study concluded there were insufficient funds to pay a dividend to any class of creditors.
Companies owing cash by Urbn include Burrington Estates (New Homes) Ltd, which owns Plymouth’s Eurotech House and has worked on housing initiatives in Plymouth and Exeter. Liquidators at Exeter’s Kirks Insolvency said that firm owed £51,462.
Plymouth’s MEP Systems Ltd was owing £159,523, YGS Landscapes Ltd £37,669, and Westcountry Fabrication Ltd £87,333.
System Six Kitchens, which opened in 2020, was owed £119,338. Pavilion Construction Ltd in Newton Abbot owes £93,179, RGB Holdings Ltd in Barnstaple $59.135 and Devon Tarmasters (SW) Ltd in Ashburton £33,943.
Urbn Construction’s year-to-July 2020 records indicated a profit of £461,387. The memo said the corporation received “appropriate emergency government support” during the Covid lockout and “expects to resume normal trading once the crisis peaks.”
Urbn Construction worked on several high-profile South West building projects, including Ivybridge’s Stowford Mill and Exeter’s City Arcade. Empiric Student Property suspended plans to build a 153-bed student flat tower in Bristol in 2020 to conserve cash reserves until the market stabilised.
Since the Covid pandemic began in March 2020, 1,600 building firms went bankrupt, more than shops or hotel businesses.
“Race to the bottom” in construction threatens building safety, experts warn
A “race to the bottom” in construction threatens building safety, including repairs to structures with unsafe cladding, industry figures said today.
Consultant Andrew Little says he’s seen cleanup specs on two A4 pages and given to the lowest bidder.
Lorna Stimpson, chief executive of LABC, called the lack of development in the building industry since the Grenfell Tower catastrophe five years ago “shameful.”
It comes four years after Dame Judith Hackitt, who reviewed construction industry practises for the government after the Grenfell Tower fire, warned that selecting the lowest-priced bid for a construction project led to a “race to the bottom” with contractors stripping out quality to preserve narrow profit margins.
Too often, lowest cost evaluation models are used, which promotes a race to the bottom, degrades quality, resident safety, and general confidence.
In the previous week, I received a consultant brief for a large fire safety cladding remediation job on a London high-rise.
“That brief was two sides of A4 with no scope of service, programme details, budget, or background on the desired goals.
Equally concerning, there was no quality assessment at all.
He said, “I think that nicely reflects the requirement for intelligent clienting, where behavioural change requires a move towards safe, good-value outcomes rather than lowest cost.”
Ms Stimpson, who advised government on Dame Judith’s initiative, reiterated these worries.
“This session’s title is re-establishing system confidence to protect renters’ safety.
“I’m ashamed that five years have passed [after the Grenfell Tower disaster] and we haven’t done it,” she remarked.
“Dame Judith says don’t wait to be told what to do. But I fear our industry is still waiting.”
She continued, “That race to the bottom, how can we accomplish this easier, cheaper, with the least intervention, is still a culture in our company.”
“Those from other businesses, medical, chemical, nuclear, don’t understand how we operate. Shameful.”
She stated “not everyone” was watching the Grenfell Inquiry and that she often displays video of the tower burning to “alarm people again, shock them into realising we haven’t done enough to make citizens feel safe.”
“Our industry must evolve. We need a proud industry, but I’m not,” she added.
The Grenfell Tower Inquiry has scrutinised LABC’s conduct before the fire, including its deceptive certificates that stated the tower’s flammable insulation products were suitable for tall buildings.
Lawyers for the bereaved and surviving termed its performance “abject” last week. LABC’s lawyers argued the firm was “played” by insulation makers.
Brickbats continue to be thrown at the construction industry
Original Source: Brickbats keep on coming for the construction industry
Builders can’t obtain enough bricks, yet the market hates brick firms.
In 2021 and 2022, the UK had a building materials shortage.
Covid-19 epidemic was a double whammy for the industry. Lockdowns hindered new material production, so homeowners improved their homes.
The Builders Merchants Federation (BMF) reported high supplies and availability of most materials, including lumber, but less for bricks and roof tiles.
The BMF said domestic brickmakers are at full capacity, therefore the gap should continue until three additional factories open in 2023 and 2024. That should improve the UK’s yearly capacity by 150mln bricks, replacing part of the capacity lost after the 2008 financial meltdown.
To meet demand, imports will be needed, and many will come from the EU, with all the headache that involves.
The Brick Development Association predicts longer lead times for the rest of 2018. Manufacturers have kept FMB members waiting for up to six months.
In times of shortage, raw material prices are soaring, contributing to a rise in UK building insolvencies.
400 small construction companies in the UK closed in April, according to the ONS.
What else could go wrong with a lack of domestic producers, Brexit- and Covid-related supply chain concerns, labour shortages, booming home improvement demand, and rampant inflation?
Invasion of Ukraine hasn’t benefited imports. The UK imports roughly 500,000 bricks per year to meet demand, which the construction industry (and brickmakers) don’t like because bricks are heavy and expensive to ship.
Building a brick factory is expensive and should be near a quarry.
Brickability Group PLC (AIM:BRCK) recently acquired Modular Clay Products Ltd (MCP), a supplier of UK and imported clay face bricks, for £4.75mln.
Last year, it purchased Taylor Maxwell, which Shore Capital claimed “established a UK powerhouse in brick distribution, strengthening Brickability’s buying power with virtually no customer overlaps.”
Despite this, the company upped revenue and profitability guidance for the just-ended fiscal year, but the shares are down around a quarter.
Michelmersh Brick Holdings Plc (AIM:MBH) shares fell to 94.5p from 128p at the start of the year. In May, the company reported “solid demand from our regular customers and distributors in all of our end markets” and said production volumes were on track.
Michelmersh will raise prices next month, which might represent a turning point for the company’s profitability.
Overall, we have covered the CMA’s preliminary discovery of illegal cartels in the construction industry, the bankruptcy of Urbn Construction, a Plymouth-based company that owed more than £3.5 million in debt, the impact of the construction industry’s “race to the bottom” on remediation work for building safety, and more brickbats for the industry. Stay tuned for more construction industry news updates.