The Dawnus Collapse: What it means for SMEs

The recent collapse of Dawnus Construction Holdings has sparked calls for ministers to do more to protect small firms when large companies collapse.

Swansea based Dawnus Construction Holdings filed a notice to appoint an administrator and stopped work on all of its UK sites earlier in the year. The collapse means hundreds of staff face redundancy and the supply chain is due to lose millions, with SMEs contracted by Dawnus bearing the brunt of these losses.

Impacting the Welsh economy, those employed by Dawnus and also subcontractors, there’s a significant cost related to the collapse of the company within the wider economy.

This collapse has highlighted the financial risks associated with large construction firms, alongside the significant impact and consequent risks their collapse can have on subcontractors and SMEs across the UK.

Since January last year, ministers have made it mandatory for all construction projects it funds which are worth over £2m to use Project Bank Accounts (PBAs). These ensure that if large companies like Dawnus go under they do not take the supply chain with them.

This legislation means that instead of money being paid to the main contractor, which is then responsible for paying everyone else, the money is paid into the PBA and each company involved in the project is paid from that.

But the Federation of Master Builders (FMB) who represent small and medium-sized construction firms have called for the Welsh Government to go further and ensure the scheme is also used for projects under £2m and by other public sector bodies, such as councils and the NHS.

For advice on how your SME can get the right protection in place, get in touch with Business Butler Swansea today.