黑洞社区

鈥淚 think there鈥檚 going to be a lot of contractors in crisis meetings this morning, working out what to do next.鈥�

The collapse into administration yesterday of Michael J Lonsdale has caused widespread shock and anguish among senior industry figures contacted by 黑洞社区.

鈥淭he construction industry is broken when the likes of MJL disappear,鈥� one senior source said. 鈥淟ots of damage is to come.鈥�

Michael J Lonsdale was set up in the mid-1980s and specialised in the London M&E market. In its last set of accounts for the year to September 2022, the Berkshire-based firm posted improved income of 拢191m and pre-tax profit of 拢2.5m, down from 拢2.6m the year before. Staff numbers were just under 250 but were thought to be above 300 at the time of its implosion.

Its roll call of recent jobs included the towers at 22 Bishopsgate and nearby 8 Bishopsgate as well as the Peninsula hotel at Hyde Park Corner. 鈥淭hey did loads of stuff,鈥� one consultant said. 鈥淚t鈥檚 a sad day.鈥�

黑洞社区 understands that among the current jobs the firm was lined up to work on were Mace鈥檚 Woolgate Exchange scheme, while it was close to a deal on Overbury鈥檚 refurbishment of the Citibank tower in Canary Wharf. The St Pancras Commercial Centre, being built by Bam, is another job thought to have been affected.

Lonsdale was run by founder and chairman Michael Hoodless and his managing director Gary Herbert, who joined the business in 1988 a couple of years after it was set up.

A lot of contractors panicked after covid and bought work and now they鈥檙e having to deal with the shock of inflation. They鈥檙e trying to get the subcontractors on the hook

鈥淭here鈥檚 a lot of goodwill to those guys,鈥� one source said. 鈥淭hey鈥檙e both larger than life characters. They鈥檙e good blokes. I鈥檓 not sure what鈥檚 been going on behind the scenes but their statement yesterday was pretty clear.鈥�

In a memo signed by the stricken firm鈥檚 directors, announcing to staff its administration, the company spelt out who it thought in part should carry the can for its woes.

It said 鈥渁ggressive commercial tactics employed by certain general contractors has regrettably led us to this unfortunate situation鈥�.

鈥淚鈥檇 heard some firms weren鈥檛 paying them but there were others who were making faster payments to help them out,鈥� one source said.

鈥淎 lot of contractors panicked after covid and bought work and now they鈥檙e having to deal with the shock of inflation. They鈥檙e doing jobs at the wrong price and they鈥檙e trying to get the subcontractors on the hook. I think there will be more of this.鈥�

Another added: 鈥淚t鈥檚 very sad as Gary Herbert and his team have built a great business but sadly some contractors are throwing everyone under the bus to make sure they don鈥檛 have to take any responsibility.鈥�

Lonsdale鈥檚 statement said it had got through the shocks of Brexit and covid-19 but added: 鈥淯nfortunately, the ongoing conflict in Ukraine has added further strain, with surging inflation, workforce shortages, project delays, and supply chain disruptions, ultimately culminating in financial difficulties for the business. Our credit rating has suffered due to our limited credit with many suppliers, necessitating the need to make pro-forma payments for goods 鈥� a practice that is unsustainable for a business of our scale, with an annual turnover of 拢250m.鈥�

When a company of this size goes, they usually owe a lot of money. The bigger problem for us is the people in their supply chain

One rival said that with M&E being a trade at the tail end of contracts, getting the pricing right on jobs is all the more problematic. 鈥淭hey were a good company but they probably pushed too hard on programme, price and risk taking and their generally elongated contract periods have probably caused real inflation pain that they couldn鈥檛 back off to others.鈥�

This year seems to have been especially bad for firms going under. Tolent, Buckingham, Henry Construction, Ilke Homes, J Tomlinson to name a few have all gone.

鈥淔irms are going bust all the time at the moment,鈥� one boss said. 鈥淚t鈥檚 a real issue. I think it鈥檚 a combination of covid, inflation and now there鈥檚 less work around.鈥�

He added: 鈥淢y biggest concern is how many people are in Lonsdale鈥檚 supply chain and to what extent this is going to affect them. When a company of this size goes, they usually owe a lot of money. The bigger problem for us is the people in their supply chain.鈥�

He dismissed talk of a resurrection for Lonsdale. 鈥淚n my opinion, they鈥檙e gone. Their staff are going to go elsewhere.鈥�

Recruitment consultants are already seeing a flood of CVs from Lonsdale staff while main contractors will also be on the lookout. 鈥淭hey鈥檒l want their jobs to carry on, so they鈥檒l be picking up staff,鈥� one source said.

Access to credit has been a growing issue since supply lines were tightened. 鈥淚t鈥檚 quite hard to get debt and one way to save money and keep cash is not to pay bills,鈥� one source said. 鈥淚t鈥檚 as simple as that.鈥�

He added: 鈥淭he initial concern to the surviving masses will be the potential further moves taken by the bonds and credit insurance markets in tightening the availability of such securities - which are relied upon by funders and developers at the top and the supply chain at levels further down. A vicious circle [is] starting to form.鈥�

So what are the lessons, then? 鈥淪ome firms take money out in the good times and don鈥檛 leave enough in for the bad times,鈥� one chief executive said. 鈥淚 don鈥檛 know if that鈥檚 the case here but you have to keep cash in the business.鈥�

And another source admitted: 鈥淥ne firm鈥檚 loss are others鈥� gains. Other tier two MEP firms will see an opportunity here. There are firms out there with incredibly strong balance sheets and there will be a flight to quality.鈥�

For now, though, there is a lament that another well-established business has succumbed. 鈥淭hey were a good firm and they did some very good work,鈥� one chief executive said. 鈥淥ur team will miss them. We liked them and trusted them and when firms like that go, it鈥檚 very sad.鈥�