The price of austerity
Published: 10 September, 2010
UK: David Hudson, partner at Baker Tilly Restructuring and Recovery LLP, commented on the fate of Connaught: “This is a serious example of the knock-on impact of the spending cuts to suppliers announced back in May. The construction industry was particularly hard hit during the downturn, even now, the private sector is struggling to regain growth.
“It further unbalances the view that the UK is on its way out of the recession. The impact of the spending cuts with Connaught not only affected the building contractor itself but subcontractors and suppliers to it. Many contractors took advantage of TTP (Time to Pay) with HMRC during the down turn. Some may have also employed the use of CVAs (Company Voluntary Arrangements) to allow continuation of trade and for the survival of the business.
“However, due to the strain on HMRC and creditors, HMRC is coming under stricter guidelines in a situation where a company falls short due to default. The fate of Connaught sends a strong message to suppliers to the public sector and we expect to see more cases to follow.”