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Structure blamed as industry looks to learn lessons from Rok’s demise

The sudden demise of Rok offers important lessons for others operating in the sector.

Rob Hunt, the PricewaterhouseCooper administrator in charge of Rok, said its demise was sealed by public sector spending cuts and the ongoing recession.

Asked why so little of the company had been purchased, he said: “Some of that was due to malaise in the economy and some of it was the work Rok was doing.

“Most importantly, they felt there weren’t sufficient revenues in Rok based on the costs - they felt it unsustainable.”

The company’s rivals said its structure was a central cause of the collapse.

One senior figure said: “Rok was completely counter-intuitive in terms of fixed costs. It bought lots of companies so it had an incredibly heavy overhead burden.

“Integration is challenging. Rok did that in a grand style over a number of years and to get that right would be near impossible.

“Underestimating the impact of that integration process is a huge mistake - if you don’t get people working effectively with you, it comes at a very high price.”

Another industry figure said PwC’s failure to sell most of Rok’s contracts showed there was little profit to be had from them.

Panmure Gordon analyst Andy Brown said he was concerned by the company’s high staff turnover, an important issue for consistency of contracts.

Hudson Contract managing director David Jackson believes the firm’s reliance on employees, rather than trades labourers, helped to precipitate its downfall, pointing to recent research which found that freelance wages have fallen below those of employees.

Another analyst agreed: “Rok was trying to affect a move that no one else had managed in terms of becoming a national local-builder. Where there was a decent size conurbation they would set up an office - no one had done that before and it proved a mistake.”

One thing all agree on is that Connaught’s and Rok’s demise were not reflective of the sector.

Rivals including Kier, Morrisson, Mears and Willmott Dixon are not considered to be in danger, as they carry cash surpluses and diverse revenue sources.

 

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