The Impact of Insolvency on the Supply Chain

Episode #11

Jacob delves into a pressing issue within the construction industry: insolvency. He's noticed a concerning trend in recent headlines, with more and more contractors and subcontractors facing financial difficulties and going under. 

Jacob takes a closer look at the different kinds of financial troubles these folks are encountering and tries to uncover the root causes. He really stresses how vital it is to do your homework when you're partnering with contractors. That means checking out their payment track record and credit scores to make sure you're dealing with reliable partners.

But it's not all gloom and doom. Jacob also shares some practical advice to help subcontractors safeguard their businesses and reduce the risk of potential losses. So, if you're in the construction business and want to navigate the tricky waters of insolvency, this episode has some valuable insights and actionable tips for you.

 

KEY TAKEAWAYS

  1. Insolvency is a significant issue in the construction industry, with many contractors and subcontractors facing financial difficulties and going into administration or liquidation.

  2. It is important for subcontractors to carefully assess the financial health and stability of the companies they work with. This can be done through credit checks, checking payment statistics, and developing relationships with key individuals within the organization.

  3. Subcontractors should diversify their employers to spread the risk of working with a company that may go bust. It is also important to negotiate favorable payment terms and reduce or eliminate retention if possible.

  4. Recognizing the signs of a contractor's financial difficulties is crucial. These signs may include late filing of company accounts, persistent rumors within the industry, late payment or non-payment of invoices, and stopping or omitting portions of work without explanation.

  5. If a subcontractor suspects that a contractor is in financial trouble, they should act quickly and decisively to minimize their exposure and potential losses. This may involve issuing notices for non-payment, protecting themselves with proper paperwork, and seeking advice from creditor service providers or debt recovery organizations.

BEST MOMENTS

  1. "There has to be some kind of a question here of whether some of these companies have continued to trade once they've already known that they've become insolvent."

  2. "The overwhelming majority is presumed to be planned debt and sadly is going to mean colossal losses to their equity investors."

  3. "A lot of the time the main contractor is asked to take on a hell of a lot of risk and depending on the scenario that they've priced the job under there might not be the time to properly examine and get to know and understand all of the risks involved."

  4. "It's not a situation of keep your fingers crossed and hope it all goes well. Because you're talking of protecting your livelihood and potentially the contractors or subbies that work for you."

  5. "It's all well and good in these situations trying to do the right thing to help out, but ultimately it's your business doing the helping out and you've got to consider what the right thing to do is for your company, not necessarily the company you're working for."

HOST BIO

Meet Jacob Austin, a Chartered Quantity Surveyor with a rich background at industry giants Balfour Beatty, Kier, and Vistry Group. With extensive involvement in education, health, and residential projects spanning various scales, from £1000s to £100M, Jacob brings a unique perspective. Having collaborated with numerous small businesses, he's now committed to sharing his expertise to drive their success. Join Jacob on his podcast, where he blends his profound insights and personable approach to offer guidance, industry secrets, and inspirational stories.

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