‘Non-recoverable’ cost increases helped send Hertfordshire contractor under, administrator says

The administrator for a Hertfordshire contractor which had been business for more 30 years has said one of the reasons it collapsed was because of “non-recoverable” rises in inflation and labour.

Stevenage contractor ARJ Construction saw pre-tax profit rise 11% to £2.8m on revenue up 61% to £117m in the year to April 2023.

But at the end of this April, the firm called in FRP Advisory as administrators with more than 100 people losing their jobs.

In an update by FRP, the firm said ARJ had “experienced a tough trading environment” and added: “The company was carrying a number of loss-making projects through this period which have arisen as a result of non-recoverable inflationary increases across materials and labour.”

FRP said the firm would not have been able to complete its jobs “without significant investment”.

It added: “The cash forecasts [for ARJ] presented a real prospect the company would very quickly run out of money rendering it unable to trade. Efforts were made by the directors to secure the future of the business but ultimately these were unsuccessful.”

ARJ was set up in 1991 with its typical jobs focussing on residential schemes of between 100 and 200 units with an average contract value of between £20m and £25m. The projects would typically last two years, FRP added.

According to the update, trade creditors and other suppliers are owed around £9.3m following ARJ’s collapse. Unsecured creditors have been told they can expect to see some money back but the exact amount is not yet known.