The collapse into administration of social housing specialist contractor Connaught is a precursor to many more according to an insolvency trade organisation.
Connaught placed most of its registered companies into administration with only the envioronmental business, which has a base in Knowsley, and the compliance side kept out of administration. Connaught Partnerships, the social housing division, has a construction depot in Widnes and is among the subsidiaries in administration.
Matt Dunham, North West regional chairman of insolvency trade body R3 and a partner at Grant Thornton, said: "Unfortunately, with the pending public sector cuts, we can expect many more companies to become insolvent. R3's research has found that businesses which were started in the last two decades are more reliant on public sector contracts than those started previously. Presently, nearly a third of small businesses say they are reliant on public sector contracts. Many of these 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% of corporate insolvencies are triggered by another company's failure 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 seek professional advice at the earliest opportunity."