Create Construction owed £11.6m to unsecured creditors

The Blackpool-based contractor collapsed in October, with administrators placing the blame on the company’s inexperience in subcontractor expertise, rising supply prices, Covid-related project delays and the government’s VAT reverse charge on construction services.

According to an administrator report from RSM, the unsecured non-preferential claims for Create include £10.4m owed to trade and expense creditors. Other debtors include HMRC, the company’s employees and Lloyds Bank.

Though the company reported a £93m turnover for the year ended 28 February 2020, it only had profits of £500,000, according to the administration report. The company’s expansion from the regional North West market to the national one led to several projects incurring significant losses.

RSM noted: “Management’s lack of experience and knowledge of subcontractor expertise in the national sector led to the company paying a premium price for subcontractor services, which in turn caused the company’s profit margin to fall.”

Turnover reduced due to the pandemic, which caused project delays that caused “substantial liquidated damages”.

High costs for supplies and labour also reduced turnover.

RSM also noted that the government’s implementation of a VAT reverse charge on construction services in March 2021 also meant that Create had to pay VAT directly to HMRC which led to a substantial increase in its VAT payments.

Cash flow issues and an inability to meet key supplier payments led to projects being stalled and terminated.

The compounding issues led to Create meeting with RSM to discuss its future options. Entering administration was deemed the best option.

Create Construction was formed on 22 March 2006 and specialised in the student accommodation, private rental and hotel sectors.

At the time of its collapse, it had several large projects, including a £7m extension of the Hampton by Hilton hotel in Blackpool. That contract is being sold to another company that Create owner Paul Mathison is a director of – HBH Construction.

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