The potential collapse of South West construction giant Midas Group Ltd could put up to 1,000 jobs at risk and wreak havoc on small supply chain firms, a leading business expert says.
Tim Jones, chair of the South West Business Council (SWBC), said that if Midas Group goes belly up it will be one of the biggest business failures to hit the region and a major blow for the regional economy.
Midas, which is involved in millions of pounds worth of building schemes across the South of England, has filed notices of intention to appoint an administrator for three companies: Midas Group, its construction arm Midas Construction, and its housing division Mi-Space.
The firm’s bosses stress it is still operating and is looking for a solution to its woes, stressing it is working “to explore all available options to achieve the best outcome for the business and our people, our customers, supply chain partners and all our stakeholders”.
The company - which has offices in Indian Queens in Cornwall, Exeter, Newton Abbot, Bristol, Newport in South Wales and Southampton - was recently ranked as the ninth largest private sector firm in the South West, by the Western Morning News, with a reported turnover of £291,267,008 and 498 employees.
But Mr Jones said that if the company was to go into administration and then into liquidation, it would spell disaster for many small companies.
He said job losses in the supply chain could hit 500, and said: “It would be a huge hit on multiple local subcontractors and material/service suppliers across the region which could cause a ripple effect of closures,” he said.
“Midas may be taken over, but the problem with administration is current contracts will be compromised and have to be renegotiated. Staff will have to be re-hired.”
Mr Jones said current projects being worked on may be stalled or worse, raising the prospect of there being no alternative construction firm available to take them on.
“We are entitled to worry about how any of these outstanding projects can be delivered as they are all pivotal as catalysts for growth,” he said. “Many are high-profile to the regional economy.”
But rumours have been circulating in recent weeks that Midas was in financial trouble, after it announced a £2m loss in 2021 - its first deficit in 40 years of trading.
Yet, despite this, the company had been bullish in its most recent financial statements, for the 18 months to October 2020.
Despite reporting a £2.037m after-tax loss, compared to a £622,000 profit for 2019, it still had £6.59m in net assets and £18.9m in cash which the firm said “demonstrates the underlying strength of the group”.
It said the firm entered the next financial year, to October 2021, with a strong order book which combined with positions on 45 frameworks gave the board confidence that 2020/21 “and beyond” would see the Midas Group return to “a steady profitable growth”.
Its subsidiary Midas Construction was also said to have “a positive outlook” and Mi-space also “positive” with positions on 18 frameworks and “visibility of workload opportunity up to five years in the future.”
The report also said: “The group therefore have a reasonable expectation that it has adequate resources to continue in operational existence for a period up to June 30, 2022.”
However, now Midas says it has been hit by problems associated with the Covid pandemic and its lockdowns, and from shortage of materials and labour, and increasing input costs, which have hit the construction industry generally and led to a number of high-profile construction firm failures around the UK.
The company said: “As has been well documented, there have been issues relating to the Covid pandemic, ongoing shortages of materials and labour, and significant cost inflation, which are providing challenges in the construction sector and across the UK economy, which have had a direct impact on Midas’s own operations. Over recent weeks we have been working closely with all our stakeholders to attempt to resolve the situation and are continuing to do so.”
