Analysis: the potential implications of Aberdeen-based housebuilding giant Stewart Milne falling to rubble

The potential major ripple effect of a housebuilding giant going under.

Stewart Milne Group was an “absolutely fantastic” place to work, says Allan Cunningham, who says he put “blood, sweat, and tears” into his 22-year career with the housebuilder that saw him move hundreds of families – including his own – into its all-mod-con properties.

But now, the construction veteran says he is “devastated” to find himself among the 200-plus staff being laid off by the company after it at the start of this week collapsed into administration. The folding of one of the biggest names in its field in Scotland and the UK is also prompting fears from construction experts that it could be the start of a domino effect of other sector firms toppling.

Administrator Teneo was appointed on Monday for the independent housebuilder, which is headquartered in Aberdeen, and said it had grown since its formation in 1975 to operate nearly 40 housing developments across Scotland (including the Shawfair development on the outskirts of Edinburgh) and North-west England. “We're not just building houses, we're building communities and towns, as well many other fantastic neighbourhoods, up and down the country,” it had claimed.

One of the unfinished homes at the housebuilder's Dargavel Village development in Bishopton. Picture: John Devlin.

But Teneo said the "difficult" decision was made to place the group and six Scottish subsidiaries into administration after the repeated failure to sell the business or secure a "viable" restructure. And now tools have been downed at its sites, and 217 staff have been given the heave-ho.

Cunningham believes his likely redundancy pay-off isn’t adequate after a long and dedicated career with the group, having started at “the bottom” as a labourer, and working his way up the ladder to latterly serve as senior construction manager for Stewart Milne Homes Scotland. “It's been a fantastic company to work for – it’s just a sad day,” he says of the group folding. “I bought a Stewart Milne home, I live in a Stewart Milne home, I brought my kids up in a Stewart Milne home, one of [them] has bought a Stewart Milne home just up the street from me.”

As for housebuyers who had laid down their hard-earned cash to buy a Stewart Milne property but were yet to move in, he says they were likely to be making it their “forever home”. Scotland’s Wellbeing Economy Secretary Neil Gray has now held talks with administrator Teneo, and says the latter is working to protect Stewart Milne homebuyers stuck in "limbo".

In terms of fears for the broader housebuilding industry, Jane Wood, chief executive of trade body Homes for Scotland, which represents the bellwether sector that it says is worth £3.4 billion a year to the economy north of the Border, said she is "very worried" about more firms going bust.

'I am devastated by this totally unexpected outcome of the sale process, and struggling to accept it,' says the group's eponymous founder. Picture: Graham Dargie.

She was quoted saying she is "greatly saddened" by Stewart Milne going into administration. Asked if she is concerned more housebuilders could go the same way, she replied: "We are very worried about it and we are worried the social and economic impact is not understood for housing. It's a force for good, it affects all of our lives. It's a human right, at the end of the day."

The Stewart Milne Group’s current predicament marks a sharp contrast to a mere six months ago when it unveiled what it said were its “best results for almost a decade”, notching up pre-tax profits of £16.5 million in the year to October 2022, up by £29.6m from the previous 12 months. It also said it had a “strong” £15.8m of year-end cash. However, it added that reduced spend on land in the prior two years, “as a direct result of Covid”, led to the number of units falling to 583 from 828, leading to turnover and operating profit being down £48.7m to £172.4m and by £1.4m to £7.1m respectively year on year.

And the firm has faced high mortgage, supply, and staff costs and low sentiment in the sector, with the headline S&P and Chartered Institute of Procurement and Supply construction purchasing managers’ index for November last month found to have decreased further to 45.5 from 45.6 in October, remaining in the sub-50 contraction mode. Several housebuilders have noted the challenging backdrop, with Scotland’s Springfield, for example, in September flagging the impact of “reduced homebuyer confidence”.

Also heartbroken by the folding of Stewart Milne Group is its eponymous founder, with the firm going on sale in 2022 on the back of his decision to retire, and put back on the market last year, but neither attempt coming to fruition despite interest, and following the sale of Stewart Milne Timber Systems to Fife-based Donaldson Group in 2021.

The businessman and former Aberdeen FC chairman said: "I am devastated by this totally unexpected outcome of the sale process and struggling to accept it, given the profound impact it will have on employees, sub-contractors, suppliers and customers. Stewart Milne Group was up for sale and, following significant interest, two bids were submitted.

"[Lloyds] bank has not accepted either bid and withdrawn its funding. I tried everything I could to find a way to achieve a better outcome for the business and the people who depend on it. I believe one of the bids could have delivered a comparable, financial return to administration and, crucially, allowed the business to continue to operate, safeguarding hundreds of jobs and protecting livelihoods."

Cunningham is full of praise for his former boss Milne, saying: “I've met him on numerous occasions, and he always knew you by your first name… he built the company up from nothing, and it's just the economy that’s snookered it. I’m feeling sad [about the firm’s collapse] – but I can guarantee that Stewart Milne will be feeling a lot sadder.”