Before we get too comfortable as armchair critics of rapacious footballers and financially illiterate European states, we should take a long, hard look at ourselves
Just when we thought the worst of the financial crisis was over, along came the Greeks to remind us what cash flow problems look like on an epic scale.
And, before we say “serves them right for borrowing more than they can afford”, it’s worth remembering that the country with the next highest debt-to-GDP ratio in Europe is, er, us.
The truth is that we’ve all got used to living beyond our means - not just in our private lives, but in business and even in sport.
“Before we say ’serves the greeks right’, it’s worth remembering that the country with the next highest debt-to-GDP ratio in Europe is, er, us”
Every day, the back pages tell us about some new crisis in the over-geared world of football. First, Portsmouth went into administration. Now Liverpool is up for sale to bail out its American owners. Even Manchester United - the biggest and best-known name - has so much debt that one bad season could bring it crashing down.
If you’re sick of hearing about the antics of greedy prima donna footballers, you probably don’t find that upsetting. But the reality is that our own industry is no different - and I speak from personal experience.
I used to own part of a company called Allan Roofing. We sold most of our shares to an investment group, which had bought three other construction companies. Their plan was to use group synergies to save costs and grow all the businesses together.
On paper, it made sense but in reality they’d over-stretched themselves. They needed all four companies to perform well but, with the exception of Allan, they didn’t. When the recession bit, the only way for the new owners to meet their commitments was to take money out of the one profitable business, which was Allan.
But cash is the lifeblood of any business, however profitable. If you take it out faster than it comes in (as Allan’s parent company did), it can’t end well - and it didn’t. Two months ago, Allan followed the other companies into administration.
Now, I have to hold up my hand and admit I made a mistake. If I had my time again, I wouldn’t sell the business: it cost me money and it cost people I care about their jobs. And what’s really depressing is that it was all so unnecessary.
Allan was a good business. It had a good team, happy customers and a full order book; in a tough market, it was still turning a good profit. But it failed because its owners over-stretched themselves.
“Allan had a good team, happy customers and a full order book; in a tough market, it was turning a good profit. But it failed because its owners over-stretched themselves”
The real victims in the Allan story are the people who worked there. They worked hard, they did a good job and they built a successful business.
I wish I could tell you this was an isolated story - but, sadly, there are far too many like it in the construction industry at the moment.
So, is it all doom and gloom? Well, maybe not. One word we’ve all heard a lot more in our industry over the last two years is “sustainable” - and, when people use it now, they’re not just talking about ticking a box to look like a responsible corporate citizen.
There’s an appetite for thinking longer-term again. People are starting to be pickier about whom they do business with - and how. When they’re choosing a supplier, they don’t just think about how they can achieve the biggest margin; they look at who’s going to do the right job at a fair price. Because they’ve learned that squeezing people may work in the short-term, but it doesn’t earn you a sustainable future.
Of course, that’s good news for me, because my new business is all about sustainability (green roof, anyone?).
But this new attitude is also good news for our industry as a whole. I don’t know about you, but I’d say we’re all ready for a happy ending.
Luke Wessely is a director of the Eden Roof Company