Lessons should be learned from Carillion collapse

posted by 3 years ago in News

It might be Valentine’s day but there’s certainly no love lost between Carillion and the small businesses caught up in the wake of its failure.

The collapse of the business put tens of thousands of jobs and supplier companies at risk. It left hundreds of billions of pounds of public contracts unfinished and will cause the government’s pensions lifeboat around £800 million in liabilities.

The company was making some of its subcontractors wait as long as 120 days for bills to be settled, it’s been revealed. Many firms are now facing financial ruin as a result.

Giving evidence to MPs about the company’s demise, Carillion directors blamed Brexit, Qatar, the 2017 general election and each other. They admitted failing to question the company’s business model and turned down the opportunity to hand back their bonuses voluntarily.

Carillion was the main contractor on 57 construction projects worth a total of £5.7 billion, including a £1.3 billion HS2 contract.

Head of Businesscomparison.com Philip Brennan comments:

“The fallout from the collapse of Carillion has had a catastrophic affect on small businesses and supplier companies that have been dragged down by the failings of the company. Carillion’s demise has put the future of many other businesses in its supply chain at risk as many are likely to only receive a fraction of what they’re owed. The company’s extension of its standard payment terms to 120 days had already put an unwelcome financial burden on smaller firms. Unfortunately, these unsatisfactory payment practices are too common among some big corporate companies.

He continues:

“Looking ahead, there needs to be tighter regulation of payment practices for small businesses. They deserve to be paid on time for the work that they do. Also, the government has its part to play in meeting its target of at least one third of taxpayer-funded contracts going to smaller firms rather than through big corporations.”