Fears that employees and subcontractors working on Carillion’s private contracts would immediately lose their jobs have been dispelled as a spokesperson for the Insolvency Service said:
“The Official Receiver is very pleased with the level of support shown by Carillion’s private sector service customers.
“Over the past 48 hours all of the company’s private sector service customers have been contacted to determine their ongoing needs.
“Over 90% of these customers have indicated that they want Carillion to continue providing services in the interim until new suppliers can be found and will provide funding which enables the Official Receiver to retain the employees working on those contracts.
“Work has paused on construction sites, pending decisions as to how, and if, they will be restarted.”
Bank Emergency Measures
New banking trade association, UK Finance is coordinating emergency assistance by banks to Carillion supply chain SMEs.
Stephen Pegge, UK Finance MD, Commercial Finance, said, “UK banks and the Government are working closely to make sure the impact of the Carillion liquidation on SMEs in the supply chain is understood and managed in a way that best supports those in need of assistance.
“Lenders are contacting customers and, where appropriate, are putting in place emergency measures, including overdraft extensions, payment holidays and fee waivers to ensure those facing short term issues can be helped to stay on track.”
Questions in the House
Yesterday (17 January), the Prime Minister, Theresa May said during PM Questions in the House of Commons that “Public service workers should continue to turn up to work confident in the knowledge that they would be paid”.
Arrangements for the 1400 apprentices that stand to lose their positions remain unclear, but the PM said “the minister with responsibility for that will be looking very carefully to see what action can be taken.”
In answer to criticism of the government for continuing to award Carillion public contracts even after the company issued profit warnings, Theresa May said “If it was the case that government – or indeed private companies – pulled out of contracts every time a profit warning was issued, that would be the best way to ensure that companies failed and jobs were lost.”
Theresa May went on to say that in recognising Carillion were in trouble, all but one of the contracts issued in the last six months has been part of a joint venture meaning that other companies were part of the agreements and can now step in and take over the contract.
Jeremy Corbyn said “This isn’t one isolated case of government negligence and corporate failure. It’s a broken system.” He went on to cite other failing public service contracts, such as the East Coast train service run by the East Coast and Virgin, disability assessments run by Atos and Capita, and Olympic security by G4S.
HMRC Offers Support for Businesses Affected by Carillion Liquidation
HMRC has encouraged businesses that were contracted to Carillion to seek advice through its Business Payment Support Service (BPSS) on paying taxed owed.
It promised “a fast and sympathetic route to agreeing the best way forward and addressing immediate concerns with practical solutions.”
The BPSS can has been empowered to agree instalment arrangements, suspend any debt collection proceedings, review penalties, reduce any payments on account and agree to defer payments due to short-term cash flow difficulties for companies affected by the Carillion collapse.
The Business Payment Support Service is open 7 days a week 8am-8pm on weekdays, 8am-4pm weekends, telephone 0300 200 3835.
Unite Calls for Direct Financial Support
Since Carillion was placed into liquidation on Monday, 15 January, it has emerged that the company owed in excess of £1 billion to 30,000 subcontractors. They have been told by the administrators PWC, that they will receive just 1p in the pound on money owed.
It has also emerged that at least £1 billion worth of Carillion construction projects have been stopped, with no certainty of when this work will restart.
Unite, the union, is calling on the government to provide direct financial support for sub-contractors and Carillion’s supply chain.
Unite assistant general secretary Gail Cartmail said:“The government has a moral duty to provide direct financial assistance as well as other support in order to ensure that sub-contractors and suppliers don’t needlessly go to the wall, with thousands of workers potentially losing their jobs.
“If decisive action is not taken by the government and clients, then thousands of workers employed by sub-contractors and in its supply chain face losing their jobs, with vital skills and expertise being lost from the industry.”
Predictions nothing to smile about
Ian Anfield, MD at Hudson Contract was monitoring the state of affairs at Carillion last year. He said, “It gives me no pleasure to say that I predicted the end of Carillion at the start of 2018 and my immediate concern is for the knock-on effect its collapse will have on the construction industry.
“To many of us who worked alongside, or for, Carillion, they were affectionately known as ‘carry on construction’, run by accountants rather than engineers and quantity surveyors. Sites were hamstrung with so much red tape they could not function as they should. However, unlike Sid James and the gang, Philip Green and his chums have not left us anything to smile about.”
Ring-fence public service operations
In other quarters, the Carillion collapse has led to calls for a review of the way in which tier one, main contractors, and the construction industry as a whole, operate.
Brendan Sharkey, from accountants MHA MacIntyre Hudson wants to see public service operations isolated from the rest of construction companies’ activities. He said:
“In future, the government should insist on a ring-fencing of the outsourcing operations that big public sector service providers perform for schools, prisons and local authorities from the costly and risky construction projects these giant companies also undertake.
“After the financial crisis the government forced the banks to separate consumer banking from their riskier loans and financial operations. Regulating giant service providers in the same way would prevent the profits generated providing school meals and housing from being used to shore up over-budget construction programmes.
“The collapse has also highlighted the danger of construction companies spreading themselves too thinly across different areas. Firms may be wise to take a leaf out of Balfour Beatty’s book and focus on specific sectors of the market, building up expertise and leveraging specialised skills to gain a competitive edge, thereby derisking their operations.”