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Small businesses at risk as Carillion collapses

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News of Carillion’s liquidation has sent shockwaves through the construction industry, but what effect will it have now, in the future & on your business?

What is Carillion?

Carillion was one of the UK’s largest construction and facilities management company.

It held 450 public sector contracts for the government, which represented around 38% of its profits, the remainder being in the private sector.

Contracts include the HS2 railway line, maintaining prisons and MoD houses, providing school meals and supplying maintenance services to Network Rail.

It does most of its business in the UK, where it employs 20,000 workers, just under half of its total workforce.

They include construction workers, hospital cleaners, prison maintenance workers, port staff and workers in the energy and utilities sector.

How did Carillion go under?

The company managed to amass debts of £1.5 billion after taking on too many risky contracts that proved unprofitable.

Last ditch attempts to prevent the collapse failed over the weekend.

Who is the collapse likely to affect?

With such a big supply chain, the effects of the collapse are likely to be wide-reaching.

Suppliers, workers and customers will be affected, including thousands of small businesses that carry out work on behalf of Carillion on a daily basis.

What will the immediate impact be?

In the short term, there shouldn’t be much of a difference in the public-sector services provided by Carillion.

The government has stated it will provide funding so that business can continue as usual.

Information on the government’s website states that Carillion employees should continue to turn up for work as usual, providing assurance that they will continue to be paid.

What about longer-term?

The government has stated that other firms are likely to take on some of Carillion’s public-sector contracts and staff, but this leaves open the question of Carillion’s private sector commitments.

Who will pick up loss-making contracts – will other companies be found or will the government foot the bill?

For many big private sector contracts, such as HS2, other construction partners shoulder the burden and continue without Carillion.

Balfour Beatty, the UK’s largest construction company, stands to lose £45 million in the collapse, but has said contingency plans have already been drawn up.

In reality, its been estimated that several thousand construction jobs may hang in the balance as a knock-on effect of the insolvency.

Unfortunately, it’s likely that SMEs will really feel the full force of the collapse, as the possibility of payment delays or failures could constitute an immediate threat to the future of companies without much contingency to fall back on.

What do I do if Carillion owes my business money?

You will need to register as a creditor in the liquidation if:

  • you haven’t been paid for goods or services you’ve supplied to the Carillion companies in liquidation
  • you have paid these companies for goods or services that you haven’t received

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