Mark Chalmers

We discovered that Muirfields were in trouble one Wednesday morning, when a colleague’s wife texted him to say that folk were standing around outside their offices in Dryburgh, Dundee – seemingly locked out by the management.

Rumours had been circulating during the preceding week … but we were lucky, in the sense that Muirfield Contracts had just finished dealing with the defects period on a local project I worked on.  Several hundred workers were less lucky, and it must be heartbreaking for Maurice McKay, who left Charles Gray (Builders) Ltd. at the end of the 1980’s to start Muirfields, then spent the next 25 years building it into one of Scotland’s biggest privately-held contractors. 

He sold the business to Azure Investments, a private equity firm, about 18 months ago; a day after the gates were locked, the Dundee Courier stated that over 400 employees’ jobs were at risk.  What went wrong?

Muirfields were the last of the big, Dundee-headquartered contractors … for now at least … and the environment they worked in appears to have changed.  In the past few years, they built many care homes for Balhousie Group - whose period of rapid expansion is perhaps at an end.  Muirfield's specialist rendering division was very successful at winning local authority housing contracts, although I imagine that much local housing stock has been upgraded now.  Muirfields built several schools over the past few years, but changes in procurement when the East of Scotland Hubco framework was won by Robertsons must have had an effect. 

As an aside, the Hubs, just like PFI before them, have served to reduce choice and drive out competition, which will eventually push prices up … the opposite of what was intended. 

As for the catalyst of Muirfield’s demise, we can only speculate.  According to reporting in The Courier, the firm’s managing director left after a few months in post, then the finance director quit a month before they went into administration – that’s always a bad sign.  In other cases where a contractor has plenty of work and a decent “pipeline”, as Muirfields appeared to have, yet still went into administration, two factors are often blamed. 

Poor cashflow caused by difficulty getting the money in, or a lack of working capital from the firm’s backers, eventually strangles the firm.  Both of these financial throttles lead to delays in paying suppliers, sub-contractors and finally their employees … as a result, the firm's credit rating drops, their accounts with the merchants are put on “stop”, and the firm struggles to get completion bonds.  Business becomes unsustainable when the rumours spread to the extent that workers walk off site.

As I say, we can only speculate.  However, if you know about construction, you’ll know that firms regularly go bust, so that over the course of a decade or two you end up dealing with the same folk, in the same capacity, but working for a different firm each time.  If you think about it, each contract won comes at a price.  By winning a tender, you’ve come in below everyone else and by definition that means either your estimators have missed something, your margin is vanishingly slim, or worst of all you’re having to “buy” work merely to keep the business turning over.

If you know about investment … you’ll be aware that building contractors aren’t a good punt.  In fact they’ve been trying to turn themselves into “property services” or “facilities management” companies for years – because the margins are thin, the return on capital is poor, and the risks are high for general contractors.  The people who invest in them seem to underestimate the challenge of funding contracting firms, with their endless appetite for working capital.  Short term, you can use a contractor’s turnover to draw capital out of a business – longer term, money has to be ploughed back in if it’s going to survive.

Balfour Beatty, the largest civils and building contractor in Britain, has performed poorly for years by various measures, including that of its share price against the stock market index.  You’d be much safer to invest your pension in a drug company, a car manufacturer, or an inventor of widgets.  Probably best to avoid the banking sector, though. ;-)

A couple of years ago, I wrote that W.H. Brown Construction had gone into administration: it joined a list of large Dundee contractors who have gone bust in the past few years.  Before that I mentioned Charles Gray (Builders) Ltd., who were the biggest contractor in Dundee and one of the largest in Scotland at that time, employing many hundreds of people.  They went down in 1994, during my Year Out, and that came as a shock because Grays were turning over more at 1994 prices, from memory around £40m, than Muirfields’ turnover of £48m at today’s prices … if you adjust for inflation Grays were two or three times as large as Muirfields.

In between Gray’s and W.H. Brown’s failures, Taycon, Torith, Forman and several others have gone, too.  Now Muirfield Contracts joins the unhappy list.

The irony of Dundee’s ailing contracting sector is that the city is in the midst of a multi-billion pound growth spurt.  It’s the first since the glorious decade from the mid-1960’s to the mid-1970’s, when Dundee was practically rebuilt.  During that period, the Overgate was re-developed, the Tay Road Bridge constructed, Dundee University expanded all the way back to the New Hawkhill, the Wellgate Centre was built, along with countless new schools, many tower blocks built, and Ninewells Hospital, the largest teaching hospital in Europe, was created.  Dundee’s contractors boomed: Grays, J.B. Hay, and John McConnachie’s firms all benefitted and grew with the city.

In the 2010’s, the Central Waterfront is being redeveloped – only this time none of those firms are around to contribute, nor are there any Muirfields, Browns, or Toriths.  That leaves the next tier of contractors such as George Martin Builders, Marshall Construction of Perth, and Shepherds of Forfar – plus incoming firms whose interest in the city will pass once the glamour jobs are finished.  So far Interserve have converted the Tay Hotel into a Malmaison, McAlpines are working on the Waterfront’s infrastructure, and BAM have just begun on the V&A’s groundworks.

Other business failures have changed the shape of the construction industry in Tayside.  For example, there are lots of laminate and furniture firms in the River Tay corridor – both fabricators and merchants – and for years I wondered why that was.  Shore Laminates in Perth, Lam-Art in Dundee, Tayfirth Laminates in Dundee, and the largest of them, JTC Furniture Group who occupy the former Timex factory on Harrison Road in Dundee. 

I discovered that all of these firms (and several others) were the direct or indirect offspring of Tay Valley Joinery, the furniture firm built up by James Chalmers, a distant relation.  TVJ was set up in 1971, and from the old bleachworks at Claverhouse they grew to have two factories in Dundee and one in Perth until 1984, when “a catalogue of unusual business events coincided to bring about its demise”.  Those who served their time with TVJ went on to start their own firms, and James Chalmers went on to start JTC, so at least their collective knowledge wasn’t lost to the area.

Perhaps that’s how it goes with building contractors – their existence is tenuous, even when they appear to be well established.  Look at the recent influx of firms such as Graham Construction and Lagan Construction from Northern Ireland – their home market has dried up, many domestic competitors have gone bust, and now they’re searching for work in Scotland.  Look also at what happened to one of the longest-established Edinburgh contractors, Melville Dundas.

I clearly recall when Melville Dundas, who were a large, well-known 200-year old contractor, went bust at the end of the 1990's.   I also recall trying to discover what happened to them.  There was little information to be had, so I began a staircase of phonecalls towards the heart of the business, explaining that this was a press enquiry, and trying to resist the requests to speak to the administrator.  Eventually I reached a P.A. who promised someone would ring me back.  No-one ever did.

For whatever reason, it always proves difficult to discover much about building contractors, and soon after that Melville Dundas ceased to exist, and both their assets and staff were spread to the winds.

The list of dead contractors goes on … but perhaps only John Stodart, the chairman of Azure Investments, knows what went wrong at Muirfields.  He bought the contractor 18 months ago, and has presided over its failure.  Graham Huband at The Courier is carrying out an ongoing piece of investigative journalism into Stodart's affairs, such the other Dundee firms which he took over and which have since gone into administration…

As an aside, you would think that with the construction industry forming around 7-8% of the economy and the workforce, the rise and progress of its companies would be recorded somewhere.  You’d be wrong.  Only a handful of the biggest contractors bother to record themselves (I can think of books on John Laing, Balfour Beatty and  Edmund Nuttalls) whereas all the others are lost to history.  Perhaps the Abertay Historical Society should collect the histories of firms such as Charlie Grays, J.B. Hay, McConnachie’s, W.H. Brown, Taycon, Torith, Forman and Muirfields – along with housebuilders like Bett Brothers – before they pass out of memory, like their predecessors have.  As an aside, you can read my piece about Dorran Construction and Dye Builders here - link.