Fears for builders as Loweth goes under

The construction industry could be hit by a wave of business failures, a leading expert warned yesterday as a 120-year-old company went into administration, putting 200 jobs at risk.

The construction industry could be hit by a wave of business failures, a leading expert warned yesterday as a 120-year-old company went into administration, putting 200 jobs at risk.

Loweth Limited, a private company based in Romford, Essex, called in the receivers after racking up unsustainable losses over the last couple of years. Nick Hood, a partner at the London insolvency firm Begbie Traynor, said the business, which was founded in 1882 and had an annual turnover of £20m, was a victim of a "fierce" price war.

He said the company had been hit by a combination of increased levels of competition and very low profit margins, which meant it had been losing £50,000 a month.

"This is a tragedy for a long-established name in the construction sector, and, of course, for its staff and directors," Mr Hood said. "Loweth is just the latest victim of the ferocious price competition which exists in the construction sector. Failure rates could increase."

The latest figures show the construction sector posted 5 per cent growth last year, more than twice the pace of the overall economy. But the latest snapshot survey of the sector showed that input costs soared in April amid reports that building workers were getting annual pay awards above 8 per cent.

"That was certainly a pressure point [for Loweth]," Mr Hood said. "These were not jobbing builders and the standard of work required was very high."

The company specialised in refurbishing tenanted buildings for banks such as Barclays, Royal Bank of Scotland and Halifax, and pub companies rather than in the booming housebuilding market. "We have seen a large volume of work in the City and the South-east but it has meant that an awful lot of companies have got very highly geared," Mr Hood said.