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Home » Dispute Between Housebuilder Bellway And Surgo Construction Speeded Contractor’s Demise

Dispute Between Housebuilder Bellway And Surgo Construction Speeded Contractor’s Demise

A dispute over the fitting of kitchens at a North East housing development was at the centre of events that led to the collapse of established contractor Surgo.

Joint administrators of the Newcastle construction firm say a payment dispute between a number of North East firms led to the culmination of Surgo’s financial woes. The problems stemmed from a sub contract that turned sour with Washington-based kitchen supplier Roundel Manufacturing Ltd for installation of kitchens at Bellway’s redevelopment of the former Northumbria Police headquarters in Ponteland.

Insolvency experts from Lucas Ross, who are handling Surgo’s affairs alongside FRP Advisory, say Surgo lost an adjudication and was ordered to pay £180,000 to Roundel, which then assigned its rights to the ultimate customer, Bellway Homes, which subsequently took Surgo to court. Surgo lost and Bellway then sought a winding up of the Newcastle Business Park firm.

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Lucas Ross said it led to a “dramatic turn of events” for the contractor and its employees. Administrators were appointed to the firm in March, leading to 46 redundancies. Court documents show that lender White Oak, a specialist in Coronavirus Business Interruption Loan Scheme finance (CBILS), forced the action. Latest accounts for Surgo, for 2022, showed a carrying value of more than £500,000 against two separate CBILs loans.

Surgo’s collapse come only seven months after those accounts, which talked of a strong pipeline of orders and showed increased profits. The documents for the year to the end of October 2022 show a drop in revenues from £15.9m to £14.4m, but operating profit rose from £36,369 to £111,456. Pre-tax profit also increased from £20,820 to £75,488.

The company had weathered turbulent times for the construction industry during the pandemic, when it fell to a loss of more than £420,000 in 2020 but returned to profit the following year. Within the 2022 accounts directors said efforts to diversify meant the firm had the ability to deal with the “ebbs and flows” of the construction market, as well as further economic disruption.

The firm had worked on a number of high profile projects in the North East, including the redevelopment of Newcastle University’s Hatton Gallery; restoration and redevelopment of Newcastle Theatre Royal; building of the National Formulation Centre at NETPark in Sedgefield and the £2m redevelopment of the Grade 1 listed Old Post Office building in Newcastle city centre for Riba enterprises.

At its peak, Surgo saw £55m turnover in 2008, when it had 156 staff. And at one stage the company’s workforce was 212-strong.

Stephen Lancaster of Lucas Ross said: “Surgo’s administration serves as a stark reminder of the fragility of success in today’s economic climate, highlighting the unpredictable nature of the construction industry and the challenges faced by businesses within it.”

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