Threat to 10,000 jobs as austerity hits Connaught
Up to 10,000 jobs are under threat as stricken social housing firm Connaught looks set to become the highest profile victim of austerity cuts.
Victim: Contracts have dried in the harsh economic climate
Connaught shares, which have been in freefall since it warned that government spending cuts would wipe £80m off revenues, were finally suspended today.
The company, which manages public housing and other government facilities such as schools and police stations, is struggling under debts of £220m and faces the prospect of entering administration.
There are also concerns among tenants waiting for social housing projects to be completed.
In an announcement to the London Stock Exchange earlier today, Connaught said it believed it would be unable to tap its lenders for any further funding and admitted that the company's prospects were 'uncertain'.
In June it identified 31 projects where - due to the new coalition's austerity measures in its struggle with the national deficit - spending would be shut off.
This would slice £13m from underlying profits in the financial year.
Sales and profits were also expected to fall by a further £120m and £16m respectively next year, it added.
Connaught debts were estimated to be in region of £220m. The management, under a new chairman, Sir Roy Gardner, had tried to put together a rescue plan.
But its bank creditors apparently have decided instead to put the business in administration, under UK insolvency procedures.
Throughout the recession few listed businesses have collapsed, so Connaught's demise - it's a FTSE 250 company which at one stage had a market value of more than £500m - is surprising.
The firm, which employs 10,000 people and has around 180 social housing contracts in the UK, has been in talks with its lenders after a review identified an 'urgent requirement' for additional funds to meet current and ongoing business, in part due to pressure from suppliers and contractors.
But Connaught said in a statement: 'The group now believes that the availability of additional funds from its lenders will not be forthcoming.'
Although still in talks with others, it added: 'The ability to provide an adequate solution to the funding issues the group faces has become increasingly uncertain.'
Connaught's shares have lost more than 90% of their value since June, closing on Monday at 16.7p.
Rival Mears is circling the firm for its contracts. 'We're watching the situation carefully and we are obviously in a position to pick-up any work others are not able to complete,' Holt told Reuters today.
'We've spoken to Connaught advisers ... we've spoken to a number of people in the sector about it'.
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