A 143-year-old cladding firm was toppled by a multimillion pound bill for allegedly defective work done 11 years previously, its administrator has said.
M Price Group, which filed for administration in August, struggled with Covid and inflation before a £7.8m claim from Barratt Homes sent it over the edge, according to a report by Seneca IP insolvency practitioner John Hedger released yesterday (22 October).
The firm, which provided cladding to tall residential and commercial developments, grew out of a business first founded in 1881 by glass merchant Malcolm Price.
Signs of trouble first arose during Covid, after subsidiary M Price Services Ltd struggled to repay a £3.5m Coronavirus Business Interruption Loan Scheme (CBILS) loan from the government, which it received in September 2020.
The firm asked for an extension to the first repayment of £2m in September 2021, but ultimately paid back the amount on time.
According to Hedger, the firm was then hit hard by rampant inflation as costs of key materials soared by 200 per cent within a year. Labour shortages then bumped up costs by a further 30 per cent, Hedger added.
Overall, M Price Group incurred £8m of extra costs on contracts worth a total of £60m across all of its companies. Combined with the £2m loan repayment, the group struggled to pay suppliers and asked clients for additional payments.
Despite attempts to negotiate with clients, the group faced significant losses, including more than £3m with one of its clients alone.
After it fell behind on paying suppliers, credit insurers began to pull insured supplier credit facilities. The group spent its last 18 months trading with “little to no credit”, Hedger said.
As a result, main subsidiary M Price Ltd, which Hedger described as “the driving force behind the group of companies”, sought a corporate voluntary arrangement (CVA), allowing it to continue operating while paying its debts over a longer time period.
However, a successful legal claim by former client Barratt Homes against M Price Ltd sealed its fate. Barratt Homes won the adjudication, which concerned alleged design and workmanship defects on a project more than 11 years ago, including the use of unsafe insulation.
The enforcement proceedings “ultimately forced the directors to seek insolvency advice”, Hedger wrote.
M Price Ltd’s insurer then denied cover because of the successful claim. A CVA was then deemed unviable, giving directors “no option” but to place the main subsidiary into administration.
Some of the group’s other firms followed into administration or liquidation, leaving the parent company unable to trade so administrators were appointed.
Seneca IP was unable to estimate a return to the company’s trade creditors, as M Price directors have not yet prepared a summary of its estimated financial position.
Despite investigations being at an early stage, Hedger said he expected to uncover some capital to pay former employees for unpaid wages and holiday pay, currently obscured through transactions between M Price Group’s subsidiaries.
Barratt Homes has been contacted for comment.
