From the TUC

Cuts Watch #233: Fall-out from Connaught Collapse

09 Sep 2010, by in Cuts Watch

There are hopes that parts of Connaught will survive, but it is already becoming clear that vital repair and maintenance of thousands of people’s homes will be delayed or cancelled. When trading in Connaught shares was suspended they had already lost 90 per cent of their value, which the company blamed on the austerity programme, which made lenders unwilling to provide new finance to maintain high levels of debt.

Connaught sub-contractors are already worried and R3, the insolvency practitioners’ trade association, has warned that cuts insolvencies could lead to further problems for companies that do not themselves have public-sector contracts:

Unfortunately, with the pending public sector cuts, we can expect many more companies to become insolvent. R3’s research found that businesses which were started in the last two decades are more reliant on public sector contracts than those started in previous periods. Presently, nearly a third of small businesses say they are reliant on public sector contracts. Many of these businesses have already drawn heavily on their reserves to survive the recession, and would not withstand the financial blow of having their contract terminated.

Worryingly, insolvency practitioners believe that up to 27 per cent of corporate insolvencies are triggered by another company’s insolvency so these insolvencies lead to further corporate insolvencies. To prevent themselves from high levels of exposure, business owners  who are facing difficult funding situations should be seeking professional advice at the earliest opportunity to give their business the best chance of survival.

Connaught (which services social housing and public facilities like schools and police stations) called in administrators from KPMG on Tuesday. KPMG have said that the 4,400 jobs may be saved is buyers are found for the various contracts with local authorities and housing associations, but redundancies “will need to be made” if this does not happen. (Connaught Compliance and Connaught Environmental are not affected and continue to trade normally.)

UNISON has called for Connaught’s services (which mainly began life as Council services that were outsourced to the company) to be “insourced” –

“These services should be brought back in-house, to protect jobs and to make sure that families are not be left in sub-standard housing, because of a lack of vital repair and maintenance work.”

UNISON General Secretary Dave Prentis and UCATT General Secretary Alan Ritchie have called for a re-think of how repairs to social housing are delivered.

The Connaught crisis has been looming since May and most local authorities and housing associations report that they have or are arranging alternatives. But it is likely that many tenants will find their repairs and maintenance is delayed. Social housing provider Midland Heart, which operates in Coventry, Birmingham and Leicester, has warned that there will be delays in repairs and maintenance to 8,300 houses while a new contractor is found. Housing associations in Essex are trying to work out how to complete half-finished repairs in Southend, Basildon and Rochford. Twelve thousand tenants in Sefton, Merseyside, also face unfinished repairs or delays.

One Response to Cuts Watch #233: Fall-out from Connaught Collapse

  1. We aren’t going to export our way out of this mess | ToUChstone blog: A public policy blog from the TUC
    Sep 10th 2010, 3:15 pm

    […] up for the jobs lost in the recession and the public sector jobs the coalition plans to scrap. As Connaught has shown, government cuts will hit private sector employment as well as public, and as I noted […]