Carillion’s liquidation raises concerns of shockwaves through supply chain
With more than 20,000 employees in the UK, and billions of pounds in public sector contracts, it is feared that the effects of Carillion’s demise could be felt far and wide. Britain’s second largest construction company first issued a profit warning in July of 2017, and, since then, losses on key contracts and mounting debts has sparked fears the industry giant could go under. Today that became a reality and there are concerns that some of the firms left owing money could suffer the same fate.
Questions are also being asked as to why Whitehall continued to reward Carillion with contracts through a period when the company was forced to issue three separate profit warnings, whilst the Federation of Master Builders is urging the Government to learn from Carillion’s demise and assess its over-reliance on major contractors.
“Carillion’s liquidation is terrible news for all those who work for the company and it will have serious knock-on effects for the many smaller firms in its supply chain,” declares Brian Berry, Chief Executive of the FMB, “some of which will be in serious financial danger as a result of Carillion’s demise.”
“Carillion’s liquidation raises serious questions for the Government, not least about its over-reliance on major contractors. The Government needs to open up public sector construction contracts to small and micro firms by breaking larger contracts down into smaller lots. That way, it can spread its risk while also reaping the benefits that come from procuring a greater proportion of its work from a broad range of small companies. Construction SMEs train two-thirds of all apprentices and are a sure-fire way of spreading economic growth more evenly throughout the UK.”
“Many of Carillion’s suppliers will have automatically assumed that a group the size of Carillion would be rescued,” adds Lee Causer, Partner and construction industry specialist at Moore Stephens. “Therefore, many will not have prepared for its collapse and will struggle to get alternative contracts in place. The failure of Carillion will inevitably lead to disruption across the supply chain, and financial turmoil for sub-contractors who relied on business from Carillion.
“Its collapse could trigger a number of insolvencies across the construction sector, in an industry that already experiences the highest levels of insolvency per year in the UK. The ramifications of the failure of Carillion could be huge.”
Following Carillion’s declaration of insolvency, the government has issued advice for employees, creditors and suppliers. Click here for more information.