Builders merchants James Burrell has seen a drop in turnover and fallen to a loss in what it said was a “rapid” and “almost impossible to predict” slump in the construction sector.
The Gateshead firm, which was established in 1877 and remains a family business, has filed accounts for the year ending October 2024 in which its turnover fell from £108.2m to £95.1m. Over the same period, a previous operating profit of just under £1.5m became a £1.1m loss.
The company said the downturn in construction activity came at the same time as a committed £1m+ spend on upgrading its IT facilities. It outlined a range of cost-saving measures it had introduced to mitigate the drop in trade and said that the early months of 2025 had seen an improvement in activity on the back of growth in some sectors of construction output.
In the accounts, managing director Mark Richardson says: “The increase in the cost of living and wider economic slowdown that impacted the entire Ƶ economy from late 2023 led to a rapid decline in construction activity. It was almost impossible to predict and to adapt quickly enough, particularly for a multi-generational family owned and managed business, who recognises its people as its biggest asset.
“There is no good time for a downturn in trade to occur, but this couldn’t have come at a worse time. The business was committed to the implementation of a completely new ERP software system, the work on which had already been 12 months in the planning and preparation stage.
"We went live successfully in June 2024 and resulted in a £1m-plus investment, as well as substantial manpower costs in supporting the project, probably 25+ heads throughout and substantial attention from all levels in the business. Our new system is anticipated to serve the business for the next 20 years plus.
“Whilst our marketplace was shrinking and competition was increasing, our focus and attention throughout 2024, was on this project and our costs in doing so were racking up. What have we subsequently done about it?
“We have closed an under-performing branch to take our portfolio down from 11 to 10. Of these branches that remain, eight are freehold, with the other two leasehold being strategically important. We have reduced our headcount by 55 from a high in the summer of 2023 and are now more streamlined and fit-for-purpose. We have reduced our fleet by approx. 10% in order to balance demand and lower branch capacity. We have enacted a 12-month rental holiday from the directors’ company pension for three of the branch properties that they own and are rented to the company.
“We have undertaken a bank refinancing to stabilise and bolster our working capital. This completed in very early 2025, so outside of the timescale of these financial statements being reported on. But this will ensure a firm financial footing for the business to build in the near future. The cost savings of the above total up to approx. £2m a year, all of which are recurring, except the rental holiday which is a one-year only impact and equates to 10% of this saving.
“The key factor was recognising the need to stabilise, rebuild for 2025 and re-establish our attention back onto our customers. We want to ensure that when construction activity rebounds and demand increases, we are well placed to be able to take full advantage.
"One point to stress is that throughout, we needed to ensure that our excellent and timely payment record to our supply chain never faltered. We achieved that and it will remain as a key focus.”
The company welcomed the Government’s pledge to build 1.5m new homes, as well pledges of new infrastructure projects and spending on affordable housing. It said that “the business remains confident of being in a sound position to exploit opportunities when trading conditions improve and to pursue further expansion opportunities as and when they arise in the future.”
