FEBRUARY 2018 | 3
News
Read online at www.proinstaller.co.uk
SMALL FIRMS WILL PAY THE
PRICE FOR CARILLION COLLAPSE
Anger is growing following the collapse of the construction and services giant Carillion – the country’s
second biggest contractor. The group went into liquidation in January, putting thousands of jobs
at risk. Construction leaders now believe it will be smaller firms who have to pick up the pieces.
Suppliers and subcontrac-
tors, numbering in their thou-
sands, can expect to go unpaid
for work they may have already
completed or materials delivered,
leaving them exposed to risk of
going under too. Some 30,000
UK firms are thought to be owed
money by Carillion, with some
owed six-figure sums.
Reports claim £1bn-worth of
projects have stopped in the wake
of the collapse, including the
Midland Metropolitan Hospital,
the £154m Angel Gardens scheme
in Manchester, a £100m rede-
velopment of a former brewery
in Sunderland, a £75m student
accommodation project for Man-
chester University and the £60m
One Chamberlain Square scheme
in Birmingham.
The crisis has also hit local
councils; Lincolnshire County
Council now has to find a re-
placement contractor for its £97m
bypass, and Leeds City Council
has to look for a new contractor to
build its £115m East Leeds Orbital
Road.
Just as importantly, the de-
mise of Carillion has raised big
questions about more taxpayer
money being used to support the
construction sector - although
ministers are insisting there will
be no extra cost to the taxpayer
stemming from the collapse.
Cut red tape for
smaller firms
The Federation of Master Build-
ers fears for the collateral damage
from the Carillion crisis. Chief
executive Brian Berry said: “Ca-
rillion’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 great-
er 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.”
He later told Radio 4’s Today
programme: “Now we are in a
very precarious position while
thousands of workers don’t quite
know what their position is
and often they can’t get on site.
Carillion aren’t actually doing
the work. They are relying on
sub-contractors to do the actual
building work. Those companies
are relying on the money coming
from Carillion. That has stopped.”
Steve Mansour, CEO of building
warranty specialists, CRL com-
mented:
“It is incredibly sad that Caril-
lion has gone into liquidation,
especially for the workers now
faced with uncertainty. The clear
message to government, however,
is that it must move away from
over-reliance on huge corpora-
tions, and cut the red tape and
bureaucracy that smaller firms
face on a daily basis. This presents
a huge opportunity for bold and
venturous SME developers and
builders: not only will they con-
tinue to be the backbone of the in-
dustry, but we are expecting them
to step up with agility, creativity,
and new techniques.
“It is imperative that the
government encourages entrepre-
neurialism and further innovation
in the construction industry, and
works toward spreading economic
growth more evenly throughout
the UK. This will spur confidence
which has been desperately lack-
ing - and will help build a better
Britain.”
‘Major corporate scandal’
Alasdair Reisner, chief executive
of the Civil Engineering Contrac-
tors Association, said: “The news
is extremely worrying for Caril-
lion’s staff and suppliers. In this
challenging climate, it is vital that
industry and government work to-
gether to provide support to those
affected by Carillion’s liquidation.
We will work with the government
and other industry representatives
to identify where and how this
support can best be provided.”
Some thought there was more to
the collapse than straightforward
incompetent business manage-
ment.
Former National Infrastructure
Commission chairman Lord Adonis
told Talk Radio that the collapse
of Carillion was “one of the major
corporate scandals of our times”.
He said: “Books and films will be
made of it, a bit like Enron.”
He said he had no evidence of
any crimes having been perpetrat-
ed but said “big questions need to
be asked of the auditors in cases
like this”.
Other political opponents of
the government, including trades
unions and Labour MPs sought to
blame the government, either for
continuing to award contracts to a
firm that had reported an interim
loss of £1.1bn in September, or
conversely for not doing enough
to protect employees and suppli-
ers of Carillion.
Others urged the government
and the parties involved to protect
the countless independent con-
tractors working on projects for
Carillion, which directly employs
20,000 people.
Crisis highlights
employment rights
Tax adviser, Qdos Contractor, is
calling on the government, along
with Carillion’s liquidators, to con-
sider the livelihoods of independ-
ent contractors engaged directly
and indirectly by the company.
Seb Maley, Qdos Contractor
CEO, commented: “Each party in
Carillion’s supply chain will be
impacted hugely by its liquidation.
So, this is a hugely worrying time
for all independent contractors
engaged by the company and its
subcontractors.
“Much of the attention ini-
tially was focused on the threat
this puts Carillion’s permanent
employees under. But without the
safety of employment rights, every
independent contractor engaged
by Carillion - or through any of its
sub-contractor companies - will be
fearing for their livelihoods too.”
“Together, contractors contrib-
ute over £119bn to the economy
each year. Amid the confusion and
uncertainty, the government and
Carillion’s liquidators must con-
sider the wider impact that simply
cutting ties with its independent
contractors would have on UK
contracting and the economy.”
Some projects
stay on track
Some are offering reassurances
that Carillion’s collapse would not
be impacting their projects. Work
continues for example on the
£800m Airport City development
in Manchester which is backed by
investment from the Manchester
Airport Group and Beijing Con-
struction Engineering Group.
The government has confirmed
it will provide funding to ensure
public contracts are completed
but will not bail out any private
creditors.
Speedy, the UK tools, equipment
and plant hire services company,
is a supplier of hire equipment
and services to Carillion.
The group told Pro Installer it
was committed to supporting the
delivery of projects as planned. In
a statement, it said: “It is intended
that any profit impact of Carillion’s
compulsory liquidation will be re-
corded as an exceptional non-un-
derlying charge in the income
statement for the year ending 31
March 2018.
“The impact of Carillion’s situa-
tion is not expected to be material
to the group which had net debt
at 31 December 2017 of £88.9m.
The group remains on track to
deliver a result in line with expec-
tations for the full year.”