Leeds-based McFadden Construction has become the first victim of the financial turmoil at construction business GB Group.

Yesterday the local civil engineering firm itself filed for administration after being locked in a long-running payment dispute with GB Group over work on a major Leeds hotel project.

McFadden boss Martin Horne said: “There are several contractors that have not been fully paid on the Leeds hotel.

“We were in the throes of a second adjudication for around £700,000, after winning £450,000 in an earlier ruling for work on the reinforced concrete basement.

“But with GB Group filing for administration there is now obviously a big question mark over the case, which has been putting a big strain on our cashflow.

“This payment dispute has hit more than 120 staff and site workers as well as our suppliers. Many of these have been with us since we set up 17 years ago.”

The 14-storey Leeds hotel project is being developed by GB Group, which hailed the job six months ago as its first major venture into property development.

The construction arm GB Building has been building the project for the development arm under a £21m contract, which is half complete.

Thursday the £200m turnover GB Group filed a notice of intention to appoint administrators after attempts with banker to put a financial rescue deal together failed.

GB chairman Martin Smout said: “Alongside our advisors, we are continuing to explore funding solutions for the business and discussions are ongoing with various parties. We remain hopeful of a positive outcome.”