INDUSTRY NEWS 5


Construction giant’s liquidation leaves supply chain under threat


Carillion, the main contractor behind a reported £5.7bn of construction projects, has gone into liquidation, leaving the future of thousands of staff and its massive supply chain in doubt. After the company had racked up £1.5bn


of debt it couldn’t pay, Carillion, its lenders and the Government failed to reach a deal to save the firm, and a compulsory liquidation order was issued in January. Around 20,000 people work for the firm


in the UK, and there has been little information regarding the workers’ futures since the announcement. Among the company’s current projects were an £85m Manchester residential block Angel Gardens, a £1.3bn HS2 contract, the £450m Royal Liverpool Hospital and an Army base programme worth £340m. The company also provided services


across the UK public sector, from managing prison estates to maintaining schools and providing school meals. The Government has said it will only continue providing its own contracts that were maintained by the firm. In July 2017 Carillion warned its profits


would be hit by £845m, and following that CEO Richard Howson stepped down and shares lost 70 per cent of their value. It has been suggested that Carillion went into liquidation rather than administration because it had no ‘real assets’ left to sell.


INDUSTRY REACTION The Federation of Master Builders (FMB) commented that the Government must learn from Carillion’s demise, and review what it saw as its over-reliance on major contractors. Brian Berry, chief executive of


ONE IMMEDIATE EFFECT WILL BE TO SMALLER SUPPLIERS OF CARILLION, WHO MAY WELL FIND THEMSELVES FACING FINANCIAL PRESSURE, WITH LARGE DEBTS AND THE LOSS OF A KEY


CUSTOMER Benn Richards, partner in the restructuring and insolvency team at Clarke Willmott LLP


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the FMB, commented: “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, some of which will be in serious financial danger. “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.” Unite assistant general secretary


Gail Cartmail has called for Carillion not to keep its workforce in the dark about the company’s future. She said: “The Carillion crisis has become a major story, but it must not be allowed to go over the heads of its loyal workforce, who are effectively being held hostage by the whims of the market. “Carillion can’t keep its workforce in the


dark any longer. It needs to clearly tell them and their union representatives how they are trying to overcome the current problems, with an honest assessment of what the future holds.” Benn Richards, partner in the


restructuring and insolvency team at Clarke Willmott LLP, discussed the likely results of the firm’s collapse: “The collapse of a large scale construction company will have a ripple effect on the market. Irrespective of the valid concerns of former employees and government departments with large scale contracts, one immediate effect will be to smaller suppliers, who may well find themselves facing financial pressures with large debts and the loss of a key customer. “Although it is too early to say, the


possibility of liquidation being converted into administration cannot be ruled out, especially if it transpires that there is a willing purchaser for the business/ assets of Carillion. “However, the fact the firm has been


wound up, as opposed to entering administration, could be evidence that


there is no sustainable business to save. Nevertheless, it is highly likely that the special managers will be seeking to identify and sell any parts of Carillion’s business or assets that have any value.” John Clark of Unite Scotland indicated


that fears about Carillion’s ongoing viability had been around for some time. “This is a major concern, given the scale of the operations of Carillion across Scotland and the UK. He added: “We have had grave concerns


about this company for some time.There’s been one example after another, both in industrial relations terms and how business is dealt with, that has made us think that Carillion wasn’t the steady ship it once was.” He continued: “One example is the Aberdeen By Pass roads contract. Out of the blue at Christmas, payments made to workers over the Festive season to help them keep their lodgings over the holidays were withdrawn. The news makes you wonder if that happened because Carillion could no longer write the cheques.” Qdos Contractor has urged the Government and parties involved to protect the independent contractors. Seb Maley, Qdos CEO said: “Each party in Carillion’s supply chain will be impacted hugely by its liquidation. So, needless to say, this is a hugely worrying time for all independent contractors engaged with the company and its subcontracts. “Much of the attention so far has been 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 subcontractor companies – will be fearing for their livelihoods too. “Together, contractors contribute over


£119bn to the economy each year. Amid the confusion and uncertainty, the Government and Carillion’s liquidators must consider the wider impact that simply cutting ties with its independent contractors would have on UK contracting and the economy.”


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