Humidifying the UK for over 30 years
Carillion and around £75m of Carillion’s debt is owed to 80 engineering services firms. Their snap poll of members also
revealed that micro businesses (less than 10 employees) are owed on average £98,000 by Carillion, but one is owed over £250,000; small firms (10-49 employees) are owed £141,000 on average, but one is owed £800,000; medium-sized businesses (50 – 249 employees) are owed on average £236,000 – but one is owed almost £1.4m; and the very largest businesses (250 employees +) working for Carillion are owed on average £15.6m. According to its latest set of
accounts, Carillion was holding over £800m in overdue payments owed to sub-contractors, but the company’s liquidators PwC said they will not honour payments for work completed before January 15. Ongoing contracts are worth £47.2m to the supply chain and many have several years to run, the survey revealed. One respondent to the survey said their contract was ongoing for another nine years. Other member firms pointed to detailed design work already carried out for projects that were now unlikely to take place – so the potential impact on contractors’ cash flow could be felt far into the future. “We already knew the fall-out from this sorry episode would be extremely serious, but these figures give us a clearer picture of just how deeply our sector is going to be affected,” said BESA President Tim Hopkinson. “While firms all over the country
scramble to try and rescue something from the wreckage of Carillion’s projects, we must seize the initiative by driving forward total reform of payment practices throughout construction,” he added. BESA and the ECA had already been working on proposed legislation, introduced to Parliament just a week before Carillion collapsed by Peter Aldous MP, which could have protected small businesses from
some of these losses. The ‘Aldous Bill’ seeks to amend the
current Construction Act to ensure that retention payments are protected by being placed in a special ring- fenced deposit protection scheme. It also seeks to ensure retention payments are never held back for more than 12 months to avoid sub- contractors’ cash being misused. Mr Aldous has also intervened in
the wake of the collapse of Carillion to emphasise to ministers the importance of his Bill getting a “fair hearing in government time”. “It is vitally important that those who have lost out from Carillion’s liquidation are compensated. I am encouraged that the Government appears to be listening to the concerns of SMEs in the construction industry, which I raised,” he said. Mr Hopkinson thanked Mr Aldous for his hard work on behalf of construction sub-contractors and stressed that the collapse of Carillion “clearly shows why this legislation is urgently needed”. “There are frantic attempts going on behind the scenes to rescue Carillion’s projects and switch them to other contractors, but unless retention money is protected, there is a danger that the problem will simply be moved to another place and the same thing could happen all over again,” he said. The Aldous Bill, which has attracted
widespread cross-party support, highlights the fact that more than £10.5bn of SME’s potential working capital is locked up in retentions every year and £700m was entirely lost to SMEs over the past three years. This amounts to £20m a month, £4.5m a week or £900,000 per working day.
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