Update 19th November
Offsite construction specialist Merit has ceased trading after entering administration, resulting in the loss of most of its 340 jobs.
James Lumb and Will Wright of Interpath were appointed as joint administrators to Merit Health Limited and Merit Holdings Limited on 17th and 18th November respectively.
The Northumberland Gazette has reported that A Cramlington-based construction company has taken action to “protect the position of the business” after a winding-up petition from HM Revenue and Customs (HMRC).
Merit Group Services Limited has filed a Notice of Intention to Appoint Administrators, saying the petition caused project delays and “significant additional pressure” on cashflow, though it remains “confident that a solution to this difficult situation can be found.”
The company heads a group of 16, including Merit Holdings, which is working with Northumbria Healthcare NHS Foundation Trust on the £35m Berwick Community Hospital and a medicines manufacturing unit at Seaton Delaval. Some of the hospital units have been built at Merit’s Cramlington site and transported to Berwick for installation.
A Merit spokesperson said: “The recent filing of a winding up petition against Merit Group Services resulted in certain customer projects experiencing delays, which in turn has placed significant additional pressure on the group’s cashflow.
“We have therefore taken the decision to file a Notice of Intention to Appoint Administrators in order to protect the position of the business while we explore options. We remain confident that a solution to this difficult situation can be found.”
HMRC has not disclosed its reasons for the petition, saying such action is only taken “once we’ve exhausted all other options.”
A trust spokesperson said: “Northumbria Healthcare has been made aware that Merit has filed a notice of intention to appoint an administrator. This is a very unfortunate situation and we appreciate that this will be a very difficult time for all involved.
“The trust is continuing to work in partnership with the organisation and its advisers, and has adhered to the contractual agreements in place.
“We have robust plans in place to ensure construction work continues to progress both the Berwick Community Hospital and Medicines Manufacturing Centre at Seaton Delaval.
“We remain focused on delivering both projects as planned and are in on-going dialogue with all relevant parties to ensure continuity and minimise any potential disruption.”
Construction businesses have the highest insolvency rates in part due to the “lumpy” nature of their income, complex contracts and unforseen construction problems.
See how RMT has saved construction companies using our innovative turnaround techniques. We also have an office in Berwick!
As Merit enters formal insolvency, stakeholders often face significant uncertainty. Here is a breakdown of the legal framework and what it means for those affected.
Administration is a powerful statutory process governed by the Insolvency Act 1986. It is triggered when a company is insolvent and can no longer meet its debts. An independent Licensed Insolvency Practitioner (IP) is appointed to take control from the directors. A key feature is the statutory moratorium—a legal “shield” that instantly stops all legal actions, such as winding-up petitions or bailiff visits, providing the “breathing space” needed to rescue the business or achieve a better result for creditors than immediate closure.
The law dictates a strict hierarchy for the distribution of funds. Fixed charge holders (typically banks with security over property) are paid first. Once the administrator’s fees are covered, preferential creditors are next; this includes employees (for specific arrears) and HMRC for taxes like VAT and PAYE. Following these are floating charge holders, and finally, unsecured creditors—which include trade suppliers and customers—who are at the back of the queue and frequently receive only a small fraction of their debt.
Entering administration does not mean all jobs are instantly lost. For the first 14 days, the administrator assesses the company’s viability and may make redundancies. If a member of staff is kept on past this 14-day window, the administrator “adopts” their contract, meaning their ongoing wages and rights become a priority expense. Those made redundant can claim for unpaid wages and notice pay via the Redundancy Payments Service if the company has insufficient assets to cover these costs.
Suppliers and customers are generally unsecured creditors. Suppliers should stop granting credit under old agreements and negotiate “pro-forma” (upfront) terms for any new supply to the administrator. For customers, deposits and gift cards are rarely honoured. However, those who paid over £100 via credit card may be protected under Section 75 of the Consumer Credit Act and should contact their bank immediately to initiate a claim.
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Written ByRobert Moore
Marketing Manager
Rob has over two decades of experience in web and general marketing. He has extensive knowledge of the Insolvency sector and has helped many worried directors with their questions.
Rob is now working with the Board at RMT to develop strategic marketing programmes to support the business plan and drive more company rescues.
