The collapse of construction giant Carillion could spell havoc for the UK’s small business economy, the country’s SME trade body has warned.
The massive building services conglomerate has been forced into liquidation with debts in excess of £2bn, putting 20,000 jobs at risk. As a major government contractor, there are immediate concerns over infrastructure and maintenance projects covering schools, hospitals and transport.
But Mark Berry, head of the Federation of Small Businesses (FSB), says the failure of a company the size of Carillion could also have a devastating impact on the hundreds of small suppliers and sub-contractors who rely on its business.
In a press release issued by the FSB following the news that Carillion had gone into liquidation, Cherry revealed he had written to the company last year to express concern at the introduction of 120 day payment terms for its suppliers. He now fears that small businesses could find themselves in an even worse position waiting for overdue payments as banks and other large debtors scramble to salvage what they can from the stricken giant.
“It is vital that Carillion’s small business suppliers are paid what they are owed, or some of those firms could themselves be put in jeopardy, putting even more jobs at risk besides those of Carillion’s own employees”.
“When the dust settles on this sorry saga, there is also a wider lesson to learn about the concentration of public contracts in the hands of a small number of very big businesses. Public procurement must be much more small-business friendly, in which it is easier for small firms to navigate the system and the Government should prioritise meeting its target of at least one third of taxpayer-funded contracts going to smaller firms.”
If you are a contractor or supplier still owed money by Carillion, here is our advice for what to do next:
- Don’t panic – regardless of the eventual outcome, panicking will not help. Try to stay as calm as possible and take rational, proactive steps to protect the rest of your business.
- Check your exposure – calculate how much you are owed now and what you will be owed in future. You need to know the facts of how Carillion’s collapse could affect your business in order to plan accordingly.
- Identify your ongoing commitments – lots of public services are covered by Carillion, if you supply these directly you need to ascertain if it is safe to continue and who to invoice, which may not be immediately obvious.
- Confirm your cash reserves – Your ability to absorb potential losses will depend on what you have in the bank already, or income from other sources. It is also worth checking your commitments to other clients and making sure you can meet them.
- Confirm your credit line – As you are likely to face delays before you even learn whether you can recover any money owed by Carillion, it will help to have credit available to maintain your cash flow in the meantime.
- Identify your ongoing liquidity – Once you have worked out your exposure, your cash reserves, your ongoing commitments and your credit line, you should have a clear picture of your ongoing financial position. If the business is likely to struggle financially, it may be prudent to seek independent advice.
Update 29.01.18: The Insolvency Service have published further guidance for employees, suppliers and creditors of Carillion.
PwC have also set-up a dedicated website and helpline 0800 063 9282 to provide information for anyone affected by the ongoing liquidation.
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