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Carillion: Small firms' support ends in 48 hours

Firms working for failed construction giant Carillion on
purely private sector deals will only have two days of
government support, Cabinet Office Minister David
Lidington has warned.
Carillion spent £952m with local suppliers in 2016 and
used an extensive network of small firms, who are now
waiting to learn if they will be paid.
Employers' groups are trying to assess the exposure of
small firms, but said many faced financial hardship.
Critics want a review into the crisis.
Britain's second largest construction firm, which employs
20,000 people in the UK, went bust on Monday with debts
of about £1.5bn.
Carillion's work stretched from the HS2 rail project and
military contracts to maintaining hospitals, schools, and
prisons.
On Monday, Mr Lidington said there would be government
support for public sector contracts.
Carillion has previously said it used a wide range of small
companies because "we remain wholly committed to
generating regional economic growth and development".
Are you a Carillion contractor? Are you going to work
today? Contact us at haveyoursay@bbc.co.uk .
But the head of the Federation of Small Businesses said
thousands of jobs and livelihoods were now at risk
because those firms would be at the back of the queue for
payment.
Mike Cherry said it was a situation made worse because
Carillion extended its payment schedule to suppliers last
year.
"These unpaid bills may well go back several months," he
continued. "I wrote to Carillion back in July last year to
express concern after hearing from FSB members that the
company was making small suppliers wait 120 days to be
paid."
A partner at one accountancy firm, who asked not to be
named, said small firms were looking at total losses
stretching into hundreds of millions of pounds.
"Asset sales won't even raise enough to cover the debts of
senior bank creditors, so many small firms won't see a
bean," he said.
Rudi Klein, head of Specialist Engineering Contractor, an
umbrella group representing suppliers to the construction
industry, said Carillion outsourced virtually all its work.
He said the government knew of Carillion's reliance on
sub-contractors, but continued to award the company
lucrative work despite growing concerns about its finances.
"It's that supply chain who is going to bear the massive
loss," he said. "There could be a large number of firms
that will experience substantial financial distress."
'They've literally locked the gate'
Watershed moment for privatisation?
Carillion: Not alone in hitting problems
Where did it go wrong for Carillion?
Soldiers to schools - Carillion in UK public life
Carillion collapse: What next?
The boss of a Carillion sub-contractor, describing himself
as Mike, in southern England, contacted the BBC with his
own story.
"We've invoiced them for £240,000, going back to
September last year. I don't think we'll get this money
back.
"For us, it's a bad day, it'll impact us for the year. There
are smaller contractors who will be impacted worse."
He added: "We've always been struggling with the Carillion
culture... Their procurement people weren't good and we
didn't like working for them."
Case study: "I had to make 10 people
redundant yesterday"
Andy Bradley is the managing director of Flora-tec, which
is owed £800,000 by Carillion for landscaping services.
"The government actively encouraged businesses like
mine... to get involved in public sector contracts, to make
sure the little guy got a slice of the pie.
"When Carillion started to get into trouble last year we
were considering that we would scale back our
involvement with them.
"However... the government continued to give them
billion-pound contract after billion-pound contract and that
said to me, as a small supplier, that the government had
done their due diligence.
"We were following the government lead... only to be given
a sucker punch.
"I had to make 10 people redundant yesterday. That's 10
people with mortgages, car loans, all that stuff. It's an
absolute disgrace."
On Monday, Mr Lidington said the government was
stepping in to pay employees and small businesses
working on Carillion's public contracts and assess the
distribution of work among other companies.
However, companies working on private projects will get no
such support.
Accountancy firm PwC, which is overseeing Carillion's
liquidation, said in a statement : "Unless told otherwise, all
employees, agents and sub-contractors are being asked to
continue to work as normal and they will be paid for the
work they do during the liquidations."
But there were anecdotal reports that work had stopped on
many projects.
A bricklayer on the new £350m Midland Metropolitan
Hospital building, Philip Ellis, told the BBC that when
workers turned up on Monday they were told to go home.
He said: "About 20 of us working for our sub-contractor
were told we could go on-site to collect equipment, but
that was it.... I spent the day phoning recruitment
agencies looking for work - but was told everyone's doing
that."
Executive pay
There is also mounting criticism of the pay packages
enjoyed by directors in the run-up to Carillion's crisis.
Former chief executive Richard Howson, in charge until
last year when Carillion issued the first of three shock
profit warnings, will continue to be paid until October.
Mr Lidington told the Commons on Monday that the official
receiver had the power to impose penalties if it uncovered
any misconduct.

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