Former directors of Midas Construction Ltd have come out in support of subcontractors owed a combined £22m by the stricken firm and warned the debt could drive many out of business and cause personal hardship.
Len Lewis, Tony Davis, Frank Heal and Richard Smith, in a joint statement, said they feared the outcome for small business creditors will be “terminal” and lead to “undeserved anxiety” and said the Midas situation is an example of how the industry is “failing its subcontractors”.
All four men served as directors of Exeter-based Midas Construction well before its current financial problems pitched it, and parent firm Midas Group Ltd, into administration owing cash to almost 2,000 small enterprises in its supply chain.
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And with those businesses being unsecured creditors, administrators at global business advisory firm Teneo Financial Advisory Ltd have predicted there is unlikely to be any cash to pay them.
Messrs Lewis, Davis, Heal and Smith all left as directors of Midas Construction more than 20 years ago having steered it to becoming a £63m turnover company and one of the most successful construction businesses in the South West.
But they were horrified to learn the company they helped to create had ended up in administration with 303 people losing their jobs, despite a turnover of £223,309,000 in the year to October 2021.
In their statement the four men said: “In recent weeks we have been greatly saddened to see our former company fall catastrophically into administration and more recently to be made sickeningly aware of the enormous indebtedness which it is predicted will result in the unsecured creditors, the great majority of whom are subcontractors, recovering nothing of what they are owed.
“For many such small businesses the outcome will be terminal, for many there will be personal and family hardship, for most there will be undeserved anxiety not of their own making.”
They added: “Without subcontractors the industry fails but the industry, as hugely exemplified by this case, is failing its subcontractors.”
Midas Group Ltd and its subsidiaries Midas Construction Ltd, Midas Retail Ltd, Mi-Space (UK) Ltd, Mi-Space Property Services Ltd, Midas Commercial Developments Ltd and Falmouth Developments Ltd all fell into administration in January 2022 blaming a toxic cocktail of Covid, inflation, money owed to them but not paid, and cash flow problems for causing a financial doomsday.
Administrators have already received claims for £22,091,980 from unsecured creditors but have warned the final total might be even higher. So far, 1,372 claims totalling £19,265,000 are levied against Midas Construction, making it responsible by far for the largest proportion of the overall debt.
Messrs Lewis, Davis, Heal and Smith were involved in the early days of the business, which was formed in 1976, and grew hugely until being sold via a management buy-in to Steve Hindley and Mick Hocking in 1998. The four men all left as directors by 2002 and are all now retired. In their statement they said: “From a standing start we had between us successfully built up and led the company to be the largest privately owned construction business in the South West, enjoying top class relationships with all of our stakeholders, amongst whom were our subcontractors, who, customarily within the industry, we relied heavily upon for their profound contribution to our performance and wellbeing.”
