The National Centre for Popular Music announced last week that it was unable to pay £1m to 200 creditors and asked PriceWaterhouse Coopers to start insolvency proceedings.
The centre’s problems have arisen because it has failed to attract the expected number of visitors. It had a target of 400 000 visitors a year, but in its first six months has pulled in only 104 000.
Contractor HBG, which is owed £319 000, is the worst hit by the insolvency of client and centre operator Music Heritage Enterprises.
Other firms owed money are QS Davis Langdon & Everest, architect Branson Coates, project manager Citex, services engineer Max Fordham and Partners and structural engineer Buro Happold. Phillips Special Projects is owed £99 000 on a separate £2m contract to install electronic equipment and fittings.
HBG’s outstanding payment includes 2.5% of the £7.8m building contract held back by the client for the one-year defects liability period.
This retention period, during which the contractor must make good any defects, runs out at the end of this month.
The museum’s crisis has highlighted the problems surrounding retention money. Dennis Makey of project manager Citex said: “We must make sure we have got some sort of guarantees on fees in the future. Retentions should be ring-fenced in a trust fund.” He added: “We are not in the risk business really. And we did everything right on this project, so you do not expect part of your profit go down the pan.”
PriceWaterhouse Coopers has come up with a financial plan so that the museum can pay back some of the money owed.
Music Heritage has £291 000 left of a £11.5m grant from the Arts Council. The centre will use this money to stay open, and creditors will be asked to accept 10p in every £1 generated over the next three years. A source on the board of directors at the museum said creditors would also be offered £1 for each visitor over 150 000 a year.
The contractors and consultants must decide whether to accept these proposals at a creditors meeting on Tuesday.
HBG declined to comment.
Euan Shaw, senior project surveyor at Davis Langdon & Everest, said: “It is disappointing that it should happen when the building contract came in on time and to budget. It was a complex job to build – HBG did a superb job and everybody worked very well as team.”
He added: “There must be lessons learned from this, but it is too late for us and other projects that have proceeded on the basis of business plans that have high visitor numbers in them.”
Visitor attraction specialists at Coopers & Lybrand supplied visitor numbers for the museum’s business plan.
