Social housing dilemmas

More and more often sighing that his work,
The labour of his hands, has come to naught.

This Connaught stuff. All a bit of a mess really.

One of my neighbours works for Connaught and he is pretty worried about what will happen. If he loses his job, he’s fairly sure he could get another one reasonably quickly as there’s still a lot of building and RMI work going on round our way. But it’s that big ‘if’ that’s the problem. No-one likes that uncertainty, the not knowing when or if your job will go.

Multiply that by the 10,000 people that Connaught employs and you have a very unhappy ship indeed.

There is a variety of reasons why the social housing giant is now in this mess. And it’s surely not all down to the economy and the new government.

Connaught said back in June that it would lose around £80m because of cuts to local authority budgets in the wake of the Budget. But I can’t believe that this is the sole reason for the mess. We knew that things post-election were not going to be so rosy, whichever party won. We all knew that the money which the Labour Government had thrown at the economy and the industry would run out. We all knew that, somehow, cuts would have to be made in order to fill the fiscal black hole and that these cuts would come from the public spending budget.

So there has to be a whole host of reasons for the collapse and that stonking great £200m-plus of debt. The ‘net is full of rumours and accusations about the accounting methods used and whether or not or not the value of contracts stated was accurate. I haven’t looked closely at the accounts so I can’t really comment on that.

But what does seem fairly clear is that the tendering process for some contracts was a bit on the fanciful side. As Grant Prior points out in this week’s Opinion on Construction Enqurier if a deal sounds too good to be true, it probably is. If you put in a bid that is too low to allow you to make any money – or even to allow you to complete the job – then you are going to end up in trouble. That’s Economics 101 surely.

All this, coupled with the CPA warning that construction could be heading for the dreaded “double dip” recession – thanks in part to government spending cuts – means that the light at the end of the tunnel might be a train after all.

None of which of course helps those who are going to be caught up in the wake of the Connaught troubles. Most of the site workers will eventually find jobs with the other contractors who will be anxious to snap up the remaining contracts as the work will still need to be done by someone. But in the meantime, that’s a lot of repair work to be put on hold. And a lot of materials that won’t be purchased for a while.

Depending on what happens and how KPMG dispose of assets or the business, any merchants to whom Connught monies are already owed will have to join the queue and wait for their cash.

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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