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Carillion: the support of small businesses ends in 48 hours



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Media legend The collapse of Carillion: What does it mean?

Companies that work for Carillion construction giant in purely private sector deals will only have two days of government support, said Cabinet Office Minister David Lidington.

Carillion spent £ 952 million with local suppliers in 2016 and used an extensive network of small businesses, which are now waiting to see if they will be paid.

Employer groups are trying to assess the exposure of small businesses, but said many faced financial difficulties.

Critics want a review of the crisis.

The second largest construction firm in Britain, which employs 20,000 people in the United Kingdom, came down on Monday with debts of around £ 1.5bn.

Carillion's work extended from the HS2 rail project and military contracts to the maintenance of hospitals, schools and prisons.

On Monday, Lidington said there would be government support for public sector contracts.

Carillion said earlier that it used a wide range of small businesses because "we remain totally committed to the generation of regional economic growth and development."

But the head of the Federation of Small Businesses said that thousands of jobs and livelihoods were now at risk because those firms would be in the pay queue.

Mike Cherry said it was a situation that was getting worse because Carillion extended its supplier payment schedule last year.

"It is possible that these unpaid bills go back several months," he continued. "I wrote to Carillion in July of last year to express my concern after hearing from FSB members that the company was making small suppliers wait 120 days to pay."

A partner in an accounting firm, who asked not to be named, said that small businesses were seeing total losses that stretched to hundreds of millions of pounds.

"Asset sales will not even increase enough to cover the debts of major bank creditors, so many small businesses will not see a bean," he said.

Rudi Klein, head of Specialist Engineering Contractor, an umbrella group representing construction industry suppliers, said Carillion outsourced virtually all of its work.

He said the government knew about Carillion's dependence on subcontractors, but he continued to give the company a lucrative job despite growing concerns about their finances.

"It is that supply chain that will withstand the massive loss," he said. He said. "There could be a large number of companies that will experience substantial financial difficulties."

The head of a Carillion subcontractor, describing himself as Mike, in the south of England, contacted the BBC with his own story.

"We billed you £ 240,000, since September of last year, I do not think we will recover this money.

" For us, it's a bad day, it will affect us all year long. There are smaller contractors that will be affected worse. "

He added:" We have always been struggling with the Carillion culture … Their hiring staff was not good and we did not like working for them. "[19659023] Analysis: Dominic O'Connell, today's business presenter

Lightning seems to strike the same spot remarkably often in the construction and support services sectors of Britain.

For some, the demise of Carillion will seem like lightning From the blue, take a look back 20 years and you will find a surprising number of companies that faced similar problems, although not always with fatal consequences.

Amey, Jarvis, Connaught, Rok, G4S, Balfour Beatty, Serco, Mitie and many others have had to recognize accounts that were, to use a euphemism, optimistic, most lived to fight another day, Carillion no.

Talk to industry executives and easily find the common thread Companies that develop rapidly through acquisitions, such as Carillion was the combination of Tarmac, Wimpey, Mowlem and Alfred McAlpine, must first struggle to understand and then integrate their disparate activities.

Industry insiders told by the BBC also think Carillion overpaid for their acquisitions, leaving him with less financial fat to turn to when things got tough.

All previous companies were affected by what turned out to be Aggressive Accounting.

Read Dominic's full analysis here.

On Monday, Lidington said the government was intervening to pay employees and small businesses that work on Carillion public contracts and evaluate the distribution of work among other companies.

However, companies that work on private projects will not receive such support.

The accounting firm PwC, which oversees Carillion's liquidation, said in a statement: "Unless otherwise indicated, all employees, agents and subcontractors ask to continue working normally and be paid for the work they do. during liquidations. "

But there were anecdotal reports that work had stopped on many projects.

A bricklayer in the new building of the Metropolitan Hospital of Midland £ 350m, Philip Ellis, told the BBC that when the workers showed up on Monday they were told to go home.

He said: "About 20 of us who worked for our subcontractor told us we could go to the place to pick up the equipment, but that was it … I spent the day phoning the recruitment agencies looking for work, but I was telling everyone that they were doing that "

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Ministers held an emergency meeting on Monday night to discuss the impact of Carillion's disappearance on public services.

Mr. Lidington said after the meeting that "people were going to work [and] we have not had any report of serious interruption of service provision".

But it comes amid growing calls for a review of the way the government delivers public contracts.

Labor leader Jeremy Corbyn accused the ministers of "shocking neglect" and said the Carillion crisis was a "turning point" for the "third external dogma" that had "stripped the public".

Office of the Cabinet of Mr. Lidington Office Oliver Dowden said that the government had established "contingency measures" when concerns about Carillion arose.

"The main contingency measure we took was to make sure that all the new contracts were joint venture contracts," he told the BBC. "That means that the risk is shared with other companies and in those contracts, they continue to be delivered."

There is also a growing criticism of the payment packages that directors enjoy in the run up to the Carillion crisis.

Former Chief Executive Richard Howson, in charge until last year when Carillion issued the first of three shock benefit warnings, will continue to be paid until October.

Mr. Lidington told the Commons on Monday that the official receiver had the power to impose sanctions if he discovered any misconduct.


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