The 2022 mini-budget under Liz Truss has been cited as a major factor impacting Osborne’s build-to-rent business, according to former directors.
- Factors such as high inflation, Covid-19, Brexit, and slow public sector procurement exacerbated the company’s problems, leading to administration.
- JCT contracts impacted financials significantly by not compensating for Covid-related delays, affecting the construction division.
- The September 2022 mini-budget further destabilised the joint venture for build-to-rent properties, affecting market sentiment.
- In March 2023, a crucial £3.5m working capital line was withdrawn, leading to severe financial strain.
The directors of Geoffrey Osborne Ltd have attributed significant challenges faced by the company to the mini-budget announced by Liz Truss in 2022. They contend that this economic policy shift torpedoed their build-to-rent development business, which was a critical component of their operations, as it negatively influenced market sentiment within the construction sector.
Prior to entering administration, the company had been grappling with various issues exacerbated by external circumstances. High inflation rates, lingering effects of the Covid-19 pandemic, repercussions from Brexit, and a slowdown in public sector procurement were highlighted as contributing factors to the firm’s instability. These challenges coalesced into a strenuous operational environment, impeding progress and profitability in critical areas.
A report from the administrators at RSM elucidated further on these challenges, noting that the firm’s construction division suffered significant financial impacts due to the nature of JCT contracts. These contracts failed to provide compensation for delays experienced during the Covid-19 pandemic, leading to unmet financial expectations, particularly on several jobs located in London.
The situation was further complicated by the September 2021 sale of Osborne’s infrastructure business, which, despite thriving during lockdown, left the company vulnerable to subsequent market shifts. It was in this precarious state that the mini-budget delivered a blow to their joint venture efforts aimed at developing build-to-rent properties. This not only worsened conditions for Osborne but also had broader implications for market sentiment across the construction sector, further slowing housebuilding activities and increasing supply chain insolvency rates.
By March 2023, the financial predicament intensified when a lender retracted a £3.5m working capital facility, casting Osborne into deeper financial uncertainty. This forced the company to undertake drastic measures, including cost-cutting endeavours, redundancies, and asset sales, in a bid to stabilise financially. Unfortunately, these efforts proved insufficient in preventing the eventual insolvency.
The crux of the issue emerged when auditors could not validate the company’s status as a going concern for its 2022 financial year accounts. This inability to secure essential new contracts, compounded by the absence of fresh capital, placed the company in a ‘Catch 22’ situation, where resolution was contingent upon resources that were inaccessible.
Despite interest from potential buyers in early 2024, a deal failed to materialise, culminating in the firm’s decision to file for administration in April. This move left pre-existing commitments unfulfilled and financial obligations, amounting to £25.9m, outstanding to 504 trade creditors. The situation underscored the intricate challenges faced by Osborne, as an appointed contractor, in projects such as the 55-home development in Wokingham, Berkshire.
The Osborne administration’s challenges exemplified the complex interplay of economic policy, external pressures, and financial management in the construction sector.
