Accountants warn of domino effect for contractors after Dunne Group collapse

dunne-groupA number of small contractors could be at risk after Dunne Group entered administration last week with the loss of more than 500 jobs, Johnston Carmichael has warned.

Donald McNaught, head of restructuring at the accountancy firm, said there could be a knock-on impact on the rest of the supply chain as creditors chase payments from administrator FRP Advisory.

“We would certainly expect that when a large contractor like that fails, there is a knock-on, domino effect with smaller contractors,” he told The Herald.

“There’s probably more exposure in a stressed situation than there normally would be. Post-administration those contractors are generally bottom of the food chain behind employees and secured creditors such as banks.”

He added that for any microbusiness whose only current work is with Dunne, it could be a fatal blow.

“They’ll have to wait and see what the administrators say. Even best case scenario, payment could be months, if not years, down the line,” he said.

Bathgate-based Dunne worked on projects such as the Queen Elizabeth University Hospital in Glasgow and a number of high-profile builds in London, and Mr McNaught said the focus for FRP must be the smooth transition of current contracts.

“The size of contracts Dunne was doing, if they stop trading and contractors down tools, the recovery prospects are slim to nothing because there will be all sorts of claims for damages, looking for alternative contracts.”

Donald McNaught
Donald McNaught

Mr McNaught said that while it was “extremely unlikely” that Brexit in isolation would have resulted in the company going into administration, businesses must now contend with an additional short-term risk while politicians seek to resolve Britain’s exit from the single market.

“ be waiting to hear from the government on the timings of Brexit, but it will cause some nervousness in the lending community,” he said.

“Potentially, there could be a short term increase due to uncertainty, but if measures can be put in place quickly to address those uncertainties it will not get any bigger. If it leads to more uncertainty, then it will result in more failures, but it’s too early to go beyond that interim step.”

Workers who lost at the firm went are being offered employment support at a series of events.

Skills Development Scotland (SDS) has now pledged to offer one-to-one support to all affected, 200 of which are in Scotland.

The agency will host events at Business Gateway in Broxburn’s Greendykes Road on Thursday, July 28 and Tuesday, August 2.

The sessions have been organised by the Scottish Government’s redundancy support service, Partnership Action for Continuing Employment (PACE).

Minister for business, innovation and energy Paul Wheelhouse said: “I was very concerned to learn of the sudden developments at Dunne Group and the impact this will have on the employees, their families and, potentially, the surrounding areas.

“Through our PACE initiative, we have worked closely with the administrators FRP, since the announcement, to provide support to employees who were made redundant with immediate effect.”

As well as offering job seeking advice, the PACE sessions give support for those looking to retrain or start a business.

Mr Wheelhouse added: “I would strongly urge all those people affected by the developments at Dunne Group to attend the drop-in events which the local PACE team has arranged and to take advantage of the advice and support that is available.”

Donald Lumsden, area manager for SDS, said: “The closure of Dunne Group is being felt very widely as staff are based not just in West Lothian but right across the central belt.

“As part of the PACE response, these drop in sessions will show those affected the sort of help that’s available, from job hunting and careers advice to information on training and learning.”

In addition, construction union UCATT has invited all staff made redundant to attend a meeting at its office tonight in Glasgow.

The event will be held at 6.30pm on Tuesday, 26 July and seeks to address the needs/legal position of all Scottish workers who have lost their jobs, whether they are UCATT members or not.

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