Reed Constructions goes under, leaving 500 small businesses “looking down the gun barrel” of liquidation

Reed Constructions Australia has been placed in voluntary administration and unions have warned that up to 500 of the construction giant’s subcontractors are unlikely to be paid and may be dragged under as well.

Ferrier Hodgson partners John Melluish and Ryan Eagle have been appointed administrators.

Melluish said he will be undertaking an “urgent assessment” of Reed’s financial position and that a first creditors meeting will be held on Wednesday, June 27.

“We will be doing everything we can to provide key stakeholders with clarity about the future of the company,” Melluish said in a statement released by Ferrier Hodgson.

“Reed Constructions suffered a number of losses on contracts, largely arising from an inability to recover additional costs.”

SmartCompany contacted Melluish and Eagle but they failed to respond prior to publication.

Brian Parker from the Construction, Forestry, Mining and Energy Union told SmartCompany he was concerned up to 500 subcontractors could miss out in the administration.

“We are not happy about the whole process because in meetings I had with the [NSW] Premier Barry O’Farrell and Greg Pearce, the Finance Minister, they said they wanted all the contractors to be paid,” says Parker.

Parker says if the union had been able to negotiate directly with Reed he would be confident the contractors would get paid.

“Now we have a situation where the government is saying, ‘We have paid Reed and we are not paying twice’,” he says.

“It could be up to 500 subcontractors which are affected, which is 500 small Australian businesses and they are looking down the gun barrel of falling into liquidation.”

“There are a substantial amount of workers with these subcontractors who will be put on the dole queues.”

Parker says the Reed administration is the latest in a line of collapses within the struggling construction sector.

“We have seen a substantial amount of contractors going broke, with Westminster Homes going under and St Hilliers is on the verge of collapse as well,” he says.

“This has all contributed to at least 50,000 jobs in NSW going wanting, and now we have a situation with Reeds that I think could have been avoided.

“It’s no good for future investors and developers. The government have cut their nose off to spite their face.”

It has been a slow death for Reed after its financial troubles first came to light in February when it suffered a severe cashflow crisis and failed to pay subcontractors on four road projects, causing workers to down tools.

At the end of May, the NSW Government dumped the company from four major road projects after Reed failed to meet a two-week deadline to prove that contracts worth more than $200 million could be completed on time.

Reed has claimed it is owed up to $97 million from work it has completed on Building the Education Revolution and other government projects.

Reed Constructions Australia has been the main building and construction entity of the Reed Group. Other businesses within the Reed Group will continue to operate as normal.