Main Contractor Pursues Cladding Subcontractor for £10m Remedial Work

DOWNING CONSTRUCTION has declared it is seeking to recover a £9.8m provision it’s set aside for remedial cladding work on completed projects.

The Liverpool headquartered company’s subsidiary, George Downing Construction Ltd, settled a long-standing court case in October last year brought by Unite Students. The claim was for compensation for composite cladding, water ingress and fire prevention defects on three high-rise student halls of residence at Parkway Gate in Manchester built in 2007 and 2008.

The claim was brought against the firm as main contractor, together with its subcontractor European Sheeting Ltd, which delivered the external wall, rainscreen and cladding on the blocks.

Cladding Subcontractor Liable

After Downing Construction settled with Unite Students subsidiary, LDC, including a payment of £17.65m, it is pursuing European Sheeting’s insurers for recompense. In December last year, the High Court ruled that European Sheeting, which went into voluntary liquidation in May 2022, was liable for the cladding defects.

Now, in its latest year end accounts filed at the end of March 2023, the company says that before it recoup’s the settlement it has made provision by holding a £10m asset. Additionally, a Downing Group’s shareholder has injected £6.5m cash into the business “restoring the Group’s financial strength”.

Setting aside these provisions, Downing Group reports a pre-tax profit of £2m down from £4.8m in 2021.

The year-end accounts show a fall in revenue from £83.4m to £28.8m due to three projects completing and three beginning. These include one at the former Royal Hospital for Sick Children site in Edinburgh and the largest two, at First Street, Manchester. Gross margin increased from 3.9% in 2021 to 6.3% for 2022.

The directors state: “The group has a very healthy pipeline of contracts programmed over the next five years.

“Its business for the most part comes from related entities where typically schemes are fully funded by a mix of upfront equity and development loans thereby reducing liquidity risk for the group.”

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