Just the beginning?

In the business world, the rearview mirror is always clearer than the windshield

And so it begins. The news that a family-run independent merchant has gone into administration should come as no real surprise to most people.

In this case, it’s Derby’s Parker Severn, but in the next few months there are likely to be more.

We’ve already heard about Southern Brick and how their dependence on the new housing market meant that when the housebuilders pulled the plug on new build the company was left with no room to manoeuvre. As their joint administrator told me at the time, there comes a point when you can’t cut anymore costs, when there is no fat left to trim.

Building Supplies R Us was probably a different matter. They spent a huge amount on their launch and making a great deal of noise during the first six months, but new concepts like this need constant plugging, not a lot of flag waving and then sit back and wait for the sales to come in. Customers and suppliers need to be encouraged to buy-in to new concepts and that takes time. A week’s worth of advertising on TalkSport radio just isn’t enough. I’m also not quite sure why they needed to put a fleet of vans on the road either.

Still, they turned over something like – and I’m estimating here – £1m in 14 or so months, so there is definitely a market for internet-sourced building supplies. As Long & Somerville, Parker Building Supplies, building materialsdirect.com and all those other merchants who are trading online will tell you. And the joint administrator told me last week that they are hoping to sell it as a going concern.

The credit crunch has to take some of the blame, I guess. There was certainly talk of big funding from a backer which never materialised but it doesn’t help those creditors who have been caught out. And heavyside manufacturers are being hard enough hit at the moment as it is, they really don’t need to get stung for any more.

But they are likely to. Some building contractors are tight enough on financing as it is without the credit crunch limiting their access to emergency funding. It doesn’t take many big bad debts to knock a business sideways. Maybe that’s why the government is so keen to get lenders back to 2007 lending levels?

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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