Uncertainty Looms Over CityFibre’s Build in Halifax and Barnsley UPDATE

Uncertainty continues to cloud CityFibre’s planned UK rollout of a new 1Gbps Fibre-to-the-Premises (FTTP) broadband ISP network in the large towns of Halifax and Barnsley in Yorkshire (England), which were recently disrupted after the operator’s chosen contractor – NMCN – fell into administration.

CityFibre first revealed that they’d picked NMCN (formerly North Midland Construction) to conduct their £23m FTTP broadband rollout across Halifax (here), which was complemented by an investment of £32m to do the same in Barnsley (here), at the end of last year (here). The build in Barnsley finally began at the start of this year, while Halifax wasn’t expected to follow suit until January 2022.

Unfortunately, both projects ran into trouble in October after NMCN announced that it had appointed an administrator (here). The civil engineering firm then promptly sold its telecommunications, plant and equipment business to Svella CO2 Limited, while Keltbray Highways Limited picked up their Infrastructure Business as part of a pre-pack administration process.

The administrator’s report on NMCN suggested that there had been some historic and “significant cash flow challenges” related to ongoing trading losses and the impact of COVID-19 on their operations during 2020, which seemed to largely pre-date the contract wins with CityFibre.

The company did secure some extra funding during the Spring of 2021, but then promptly ran into trouble again, after the true scale of their losses became clear (c.£43m). Following that, they failed to publish their accounts on time and ended up being suspended from the London Stock Exchange (LSE). After that their refinancing plans fell through and hence the need for an administrator.

The situation left CityFibre in a difficult situation, having already started one of their two city builds with NMCN, and with a second one due to follow in 2022. At the time, we were unable to get a comment from the operator, and despite plenty of nudges, CityFibre has continued to stay largely silent.

We are aware that the operator has been trying to find a solution to the current problem in the two towns and probably didn’t want to say anything until that was settled, which could either involve the appointment of a new contractor or, potentially, the continuation of their existing contract(s), albeit via the new owner of NMCN’s related business. The latter would be quicker, while the former could take several months to arrange.

In the grander scheme of things this situation is unlikely to put much of a dent into CityFibre’s wider £4bn investment programme, which has already covered 1 million UK premises with their gigabit FTTP broadband lines, and they aim to have 8 million “substantially completed” – across 285 cities, towns and villages (c.30% of the UK) – by the end of 2025 (here). But it has clearly disrupted the operator’s plans for Halifax and Barnsley.

However, it’s not the first time that CityFibre has run into this sort of issue, albeit in a different context. Last year their contractor for Cambridge, Lowestoft and Bury St Edmonds – Lite Access UK (LA) – also ended up going into administration (here and here).

At the time, LA blamed the impact of COVID-19 on causing a suspension of their work, which later resulted in CityFibre pulling out over an alleged breach of their delivery contract (the last we heard, this was still being disputed). Locals and subcontractors in Lowestoft also complained about LA leaving behind a painful string of unpaid bills and allegedly doing some poor-quality work.

The good news is that, after several months of work, CityFibre did eventually find a replacement contractor (Pod-Trak Limited) to take over the Lowestoft build, which is now due to reach substantial completion in 2022. Hopefully there will be some similarly positive news for Halifax and Barnsley in the near future, but for now a cloud of uncertainty continues to hang over both, while CityFibre continues to say nothing.

UPDATE 21st Dec 2021

The Construction Index has posted a pretty good article (here) on the reasons why NMCN failed, which goes into a lot of detail and captures the correct context. It seems a lot of the problems can be traced back to the collapse of Carillion in January 2018 and the tightening in accountancy protocols that followed.

Much tighter restrictions were introduced on the practice of presenting anticipated revenue as money actually banked, which ultimately led to NMCN uncovering various historic gremlins in their accounts and that £43m loss. Some key issues related to major contracts with water companies, which were perhaps a bit too big for a company of their size to effectively deliver.