Majority of Connaught deals will not transfer to Lovell

Morgan Sindall’s attempt to pick up more than half of Connaught’s contracts is faltering as law firms said most of its social housing clients have terminated the deals.

Just six out of the 52 housing associations and local authorities represented by law firms contacted by Building have switched their Connaught contracts to Lovell, Morgan Sindall’s social housing arm.

Thirty-nine have terminated their contracts, meaning they will have to re-enter the OJEU process if the deals are worth more than £156,000 a year for services, or £3.9m a year for works. Seven clients have either not decided what to do or have transferred some contracts to Lovell and terminated others.

The law firms contacted are Devonshires (which has eight clients), Trowers & Hamlins (26), Shoosmiths (two) and Anthony Collins (16). They said their clients were worried that if they switched the contracts to Lovell they could be open to legal challenges from rival contractors.

Andrew Vickery, a partner in Trowers & Hamlins, said housing associations will seek more suppliers to avoid a repeat of the Connaught collapse. “Some will take the chance to restructure their contracts so they don’t put their eggs in one basket,” he said.

The news conflicts with a Morgan Sindall statement to the City two weeks ago, which said it had bought “the majority” of Connaught’s contracts, as well as its physical assets and its
work-in-progress, for £28m (see Citywatch, below).

It said it would add £200m of revenue to the company’s books. Despite the uncertainty, a spokesperson for the company reiterated this week that it was still “confident that the majority of the contracts will come across and the company is happy with the £200m figure.”

Last week Building revealed that Morgan Sindall would still think the deal was worth it if half the contracts came across - as long as they were the better performing deals.