Contract dispute threatens Exeter contractor

Exeter contractor Michael Thorne Construction has run into serious financial difficulties after problems on the £225m Princesshay shopping complex in Exeter. The works undertaken by MTC overran by £8.5m, causing the firm cash flow problems.

The firm has applied for a company voluntary agreement whereby around 300 creditors will get 29p for each pound owed.

Outstanding debts would be paid back when its £7m dispute with the main contractor on the Princesshay scheme, Sir Robert McAlpine, is settled. There is also a separate local dispute involving £1.3m.

A further 200 creditors owed less than £1,000 each will be paid when the company voluntary agreement is ratified.

Putting such an agreement in place would rule out the possibility of a creditor taking the contractor to court to enforce a winding-up order. A full meeting of all the firm’s creditors is being convened in early March to obtain their approval.

In the meantime, an investment package has been agreed from private investors and the firm’s directors to provide financial stability for the company, which has full order books.

The company said its financial problems arose after it “responded to a call for help” by pumping extra resources into the Princesshay project to ensure it met its Christmas programme."

The original value of the firm’s contract on the scheme increased from £4.5m to £13m after charges, delays and addition works – including more than 750 additional site instructions that were carried out.

Work on the shopping centre involved concrete floors, block work and hard landscaping.

Rob Holland, managing director of the firm, said: “Our proposal provides a planned structure to allow time to deal with the issues involved and to begin the process of paying what we owe. We are very grateful for the understanding and expressions of support from so many of those business affected, many of which we have been trading with for more than 20 years.

“If Michael Thorne fails to recoup what we believe we are owed, it will be ironic that a project that has won widespread acclaim and is seen as a symbol of Exeter’s success and prosperity may well end up costing a significant number of local and regional jobs as literally hundreds of businesses will be under threat.

“Nevertheless, the support we have received from all sides makes us optimistic for the future and the fact that private sources are prepared to invest their money … indicates that the business is fundamentally sound and has a bright future under the right circumstances.”

Princesshay was developed by Land Securities and has 400,000 sq ft of retail space.

Michael Thorne Construction was established in 1967 and employs 120 staff. Recent clients include Paignton Zoo, Somerset Fire & Rescue Service, the Eden project and Darts Farm.