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Supply chain hit just as hard by contractor administrations

Dear Sir,

Referring to the article published in H&V News on p1, 7 March, Jobs at risk as MJN Colston divided up, I would make the following comments.

Unfortunately, more often than not the majority of articles reporting the collapse of companies do not mention the knock-on effect it has on subcontractors/suppliers, who are usually at the end of the food chain and suffer huge financial losses from non-payment of interim application payments for work carried out when a company like MJN Colston calls in the administrators.

Subcontractors/suppliers suffer from outstanding monies not being paid by the collapse of these companies.

As everyone knows, serious difficulties can result in monies not being paid, causing cashflow problems and making the subcontractors/suppliers to also enter into administration/liquidation.

What is especially annoying is when the contractor that has entered administration has already been paid monies by the end-client and those monies are then used to pay off other outstanding debts, ie payee/taxes, to keep the contractor afloat, stalling payment to the subcontractors/suppliers.

The subcontractors/suppliers then have to restructure and face the prospect of redundancies or administration/liquidation when their expected cashflow has stalled with no prospect of recovery.

Finally, the article also mentions the prospect of contracts being reassigned to other service contractors who are only interested in the fruitful part of the works.

They secure the profitable part and the subcontractors/suppliers are left with major losses that are often severe, leaving the company unable to sustain such a loss without inwardly collapsing.

P J Hurley, managing director, F P Hurley & Sons