A VICTIM OF RECOVERY

The past few months of quiet and relatively stable corporate trading always had an ominous air about it. MF Kent apart, plus a daily round of smaller victims, there had been no major collapses for well over 12 months. Yet it was never real cause for celebration. Like ducks gliding on a pond, the air of calm was deceptive: below the surface, there has been desperate paddling just to keep afloat. With material and labour pressures mounting, and contractors still tendering recklessly, something had to give soon - and last week it was VAT Watkins that finally snapped.

Commentators have remorselessly remarked that it would not be until recession ended that the walking wounded were put out of their misery. This appears to be very much the case with Watkins. Precisely why Barclays pulled the plug has not been made clear, and the private company's accounts for the past year have not yet been filed. But with the contraction in Watkins' turnover, despite some low bidding, cashflow looks to have dried up and the company probably ran out of money. The absence of the once-ubiquitous 'vulture' companies shows that the group must have bought some very poorly rewarded contracts.

Barclays has acquired a reputation of being the first bank to lend money and the first to pull the plug - and that reputation will not be shaken by this latest episode. The extent of Watkins' debt has not been revealed, but with Victor Watkins offering the near œ6 million proceeds of a private sale in order to salvage his 47-year old group, one would have thought a responsible institution might have stuck by a longstanding client in his hour of crisis. All the more so when other sub-contractors will be badly hurt, perhaps fatally, by the collapse.

This is perhaps not a fashionable view with some contractors, who may be quietly cheering the demise of a competitor that undercut them in a market bloated with overcapacity. In truth, though, overcapacity is already starting to ease. Not dramatically, of course, but there are signs of a pick-up in tender prices, as an RICS survey confirms this week. Watkins was a skilled company, and the industry needs such operators. Before too long, their absence will be sorely missed.