120 workers axed after Hong Kong contractor goes bust as officials scramble to contain any knock-on effect at related firms
About 120 construction workers have been laid off because of the sudden collapse of a 44-year-old Hong Kong firm and more frontline jobs at other companies are at risk, with nearly 20 business partners seeking help from a trade union.
Government minister Chris Sun Yuk-han said the Labour Department had set up a helpline for about 120 employees of prominent contractor Fung Cheung Kee, which entered liquidation on Friday.
Sun, the secretary for labour and welfare, said on Saturday that salaries and severance payments owed by the firm would be covered by the Protection of Wages on Insolvency Fund. Authorities were working with unions to find out if more subcontractors were also in distress following Fung Cheung Kee’s fall, he added.
“We understand there are second- and third-tier subcontractors and are hoping to get in touch with them in the meantime to understand how many workers are involved, and whether they need help from the Labour Department,” Sun said.
Ryan Ng Wai-leung, rights and complaints officer at the Hong Kong Construction Industry Employees General Union, said it was difficult to estimate the number of subcontractor staff as it could be “enormous”.
The union has received more than 20 requests for help from Fung Cheung Kee employees, and nearly 20 of its business partners have been in touch.
The company with the largest arrears is owed more than HK$60 million, while a scaffolding subcontractor is due HK$10 million.
Ng said some subcontractors had paid their workers before Lunar New Year, expecting Fung Cheung Kee to foot the bill after the holiday period.
“But right after Lunar New Year, it says it is in voluntary liquidation. Many companies were shocked. We here at the union were shocked, too. Why did this happen to such an established company?” he said.
“There must have been a lot of behind-the-scenes action, though it’s hard to speculate.”
Fung Cheung Kee’s operating subsidiary, Cheung Kee Fung Cheung Construction Company, appointed a liquidator on Friday to begin voluntary winding up of the firm, according to company registry filings. The annual return showed its indebtedness stood at HK$6 million as of January 8.
Other companies associated with Fung Cheung Kee, including Fung Li Engineering Company Limited, also filed winding-up notices with the authorities on the same day.
In a staff notice circulating online since Friday morning, which unionist Ng has verified, the company said it made the necessary but “extremely difficult and painful decision” to “reduce losses of all parties” after it ran into cash-flow problems.
“We deeply understand that this news is a tremendous blow to all of you, especially those who have contributed to us for a long time,” the notice said.
“We believe that with your efforts, every employee can overcome this challenge, find new opportunities and achieve success.”
The Mandatory Provident Fund Schemes Authority said the group had defaulted on contributions for certain months of 2023 and January this year, involving about 10 employees and around HK$60,000.
Godfrey Leung King-kwok, executive director of the Construction Association, expressed shock at the closure and the company’s cash-flow problems.
“The cash-flow problem in the industry does exert pressure on small and medium enterprises,” he said, noting that leading firms also faced a similar issue.
He said cash-flow issues were a result of high interest rates and a slowdown in the private construction market.
“We hope interest rates will start going down in the second quarter and hope the government will continue to roll out public works projects in an orderly way,” he said.
Ng noted that investment mistakes had led to some collapses in the past. Cost overruns because of post-pandemic increases in manpower and material costs might have also weighed on construction firms, he added.
Fung Cheung Kee, established in 1980, had been involved in a Mid-Levels luxury flats project by Emperor International Holdings, the Mount Pokfulam development, a residential block in Cheung Sha Wan, and a one-storey structure at Discovery Bay on Lantau Island.
The Development Bureau and housing authorities said Fung Cheung Kee’s affiliates were not involved in any unfinished government projects before its collapse.
The Urban Renewal Authority said a Kwun Tong project built by the company was near completion, and the rest of works would be handled “based on contract terms”.
