From £679,000 profit to £1.3 million loss. From 89 employees to zero. From employee-owned to administration.
Timeline: 18 months.
Warwick Ward (Machinery) Ltd. entered administration in December 2025, making all 89 employees redundant.
The company had converted to an Employee Ownership Trust in June 2023.
Joint administrator James Lumb: “The additional debt that many such companies take on as part of the sale to an EOT can prove to be a burden further down the line, particularly if trading conditions become difficult.”
The debt from the ownership transition was “certainly a contributory factor in its difficulties.”
The Financial Collapse
June 2023 (pre-transition): £679,000 pre-tax profit on £51.2 million in sales.
June 2024: £1.3 million loss on £45.3 million in revenue.
Revenue dropped 11%. Profitability reversed completely.
The company carried debt from buying itself while bleeding cash.
How EOT Debt Works Against You
The EOT itself doesn’t generate money to repay lenders. The operating company transfers funds into the EOT, which sends them to the lender. You’re servicing debt with profits needed to sustain operations.
Lenders hesitate to work with EOTs because they’re repaid from future profits. When profitability drops, debt payments stop.
“An inappropriate or poorly planned sale into an EOT could push the business into financial hardship and jeopardize the business’s ability to repay any amounts outstanding to the vendor shareholders.”
Warwick Ward proves it.
The Market Context
UK construction equipment sales dropped 9% in 2023. The second half plummeted 25%. Equipment sales in 2024 fell another 10%.
Construction firms accounted for 17.7% of all insolvencies in England and Wales by May 2024—up 33.2% from May 2019.
UK-listed construction companies issued 14 profit warnings in the first three quarters of 2025—nearly triple the five warnings in all of 2024.
Over 70% cited contract cancellations or delays.
Warwick Ward converted to employee ownership in June 2023—right as the market collapsed.
The Timing Problem
Construction is cyclical and capital-intensive. Companies manage downturns by cutting costs: layoffs, reduced bonuses, deferred spending.
Servicing acquisition debt eliminates this flexibility.
Warwick Ward needed room to maneuver. The debt structure eliminated it.
What Equipment Suppliers Signal
Equipment suppliers experience demand compression before construction firms do.
When projects slow, companies delay equipment purchases first. They extend rental periods. They defer maintenance.
Warwick Ward’s collapse signals potential distress among construction companies that haven’t shown up in insolvency data yet.
The average turnover of construction companies issuing profit warnings doubled from under £200 million in 2023 to over £400 million in 2025. Larger firms feel the pressure now.
The Hidden Cost of Ownership Restructuring
Ownership transitions carry hidden costs beyond the transaction price:
Management attention diverted to restructuring. The months around an EOT conversion consume leadership focus when market conditions demand operational excellence.
Loss of institutional knowledge. When original owners exit, decades of relationship capital and crisis management experience leave with them.
Reduced financial flexibility. Debt service becomes a fixed cost that doesn’t adjust when revenue drops.
Most stakeholders ignore these costs. Financial planning must account for future commitments, not just the deal itself.
The Systemic Question
Is the financial engineering required for employee ownership incompatible with cyclical, capital-intensive industries?
The construction industry depends on economic conditions, making accurate valuations difficult. When you add debt service to an already volatile revenue base, you amplify downside risk.
Capital-intensive industries need maximum flexibility during downturns. Employee ownership transitions burden them with fixed debt payments when they can least afford it.
Warwick Ward: structural mismatch incarnate.
What This Means for Other Transitions
Before considering an EOT transition:
Can the business service debt through a full market cycle? Model 20-30% revenue drops for 18 months.
Is the industry cyclical? Debt-financed transitions amplify risk.
Where are you in the market cycle? Converting at a peak removes flexibility when you need it most.
Who retains crisis expertise? When founders exit, decades of crisis management experience disappear.
The EOT structure relies on future profits to service past debt. When profits disappear, the structure collapses.
The Broader Implications
Warwick Ward’s administration affects more than 89 employees.
Construction companies relying on Warwick Ward now face disruption. Projects delay. Contractors scramble for alternative suppliers.
Equipment supplier failures ripple throughout construction ecosystems.
The EOT model itself now faces scrutiny. High-profile failures make future conversions harder to finance and more expensive to structure.
Warwick Ward had 18 months between conversion and collapse. The market gave them no time to service the debt.
The question isn’t whether employee ownership works. It’s whether debt-financed transitions belong in cyclical industries at all.