In a significant development, insolvency experts have been appointed to Hull-based offsite construction specialist, ESS Modular, and its subsidiary, Spatial Initiative Limited.
The company has ceased operations immediately, with EY-Parthenon’s Turnaround & Restructuring Strategy team stepping in due to substantial financial difficulties.
Around 100 jobs are likely to be lost following the abrupt closure of ESS Modular. The firm has faced severe liquidity issues, primarily due to considerable losses on legacy contracts.
Insolvency experts from EY-Parthenon have taken charge, confirming most of the 100 employees will be made redundant. Support and advice are being extended to those affected.
ESS Modular and Spatial Initiative, acquired in 2020, are connected to the failed contractor ISG through their parent company, Cathexis. In the six months leading up to the end of 2022, ESS reported operating losses of £14.5 million and net liabilities of £16.7 million.
The company cited ‘acute’ market uncertainties and extraordinary inflation levels as contributing factors. Project delays, investment in overheads, and supply chain issues were also significant challenges.
Shareholders have provided continued funding despite recent financial setbacks. However, it became clear that substantial additional cash would be necessary to maintain operations.
Efforts to secure further funding failed, prompting the directors to engage EY. The firm’s most recent accounts highlight the dire financial circumstances leading to this decision.
Despite the financial turmoil, ESS Modular had been making strides to increase UK manufacturing capacity. The company aimed to capture a larger market share by promoting efficient, sustainable modular solutions for public sector projects.
As recently as August, ESS was chosen by the Defence Infrastructure Organisation to supply 16,000 living spaces for military personnel over six years. This included accommodation for Royal Navy, Royal Air Force, and Army personnel.
This week, Tim Vance, Charles King, and Andrew Dolliver from EY-Parthenon’s Turnaround & Restructuring Strategy team were named joint administrators for Extraspace Solutions (UK) Limited.
Tim Vance and Charles King were also appointed joint administrators for Spatial Initiative Limited, a wholly-owned subsidiary of Extraspace Solutions. The administrators are now overseeing the winding-down process.
In recent documents, directors described 2023 as a ‘year of transition’ focused on implementing a new strategy and concluding legacy projects. Despite implementing cost-saving measures, the challenges proved insurmountable.
ESS’s inclusion in government frameworks indicated a potential for growth. Yet, operational difficulties rooted in past projects and economic conditions ultimately hindered sustained progress.
Administrators have committed to providing appropriate support and advice to employees affected by the redundancies.
The closure marks a significant setback for the modular building sector, highlighting the complexities and risks associated with offsite construction ventures.
The administration of ESS Modular underscores the ongoing challenges within the offsite construction industry, exacerbated by financial mismanagement and market volatility.
While efforts to innovate and expand were evident, the firm’s inability to secure necessary funding precipitated its downfall, leading to substantial job losses.
