Tesot refrigeration
SEARCH

Carillion sub-contractors face huge losses

A snap poll of Carillion engineering sub-contractors shows that many companies are facing huge financial losses from the collapse of the construction giant, according to new data obtained by the Building Engineering Services Association (BESA) and the electrotechnical and engineering services trade body, ECA.

Carillion owes around £75 million to around 80 engineering services firms, who provide vital services such as electrical, plumbing, gas, fire and security, and heating and ventilation. The overall losses are likely to be far higher, given there are thousands of businesses operating in the industry. The engineering services sector is the largest part of the construction industry by value.

The ECA and BESA survey shows that contractors of all sizes have been affected by Carillion’s demise:

  • The total value of ongoing contracts with Carillion is worth £47.2 million, which are now at risk.
  • Micro businesses (less than 10 employees) are owed on average £98,000. One of these SMEs is owed over £250,000.
  • Small firms (10-49 employees) are owed £141,000 on average. One of these contractors is owed £800,000 by Carillion.
  • Medium-sized businesses (50 – 249 employees) are owed on average £236,000. One of these firms is owed almost £1.4 million.
  • Large businesses (250 employees +) are owed on average £15.6 million. This figure includes Balfour Beatty’s widely reported £45 million loss from joint ventures with Carillion.

On Wednesday, BESA and ECA met with liquidator PwC and the Government. PwC said any private sector work undertaken by Carillion suppliers before 15 January this year would be unpaid. Instead, it would be treated as ‘unsecured debt’, and placed at the back of the queue behind other creditors.

“We knew the fall-out from this seismic episode would be extremely serious, but these figures give us a clearer picture of just how hard our sector is going to hit in terms of the thousands of pounds of unsecured debt that will be lost by ordinary hard working small businesses, jeopardising their future and the future of their staff”, said BESA President Tim Hopkinson.

“These findings underline the need for concerted action from the Government and banks to protect and support SMEs in the construction and services sector. The Government should also introduce legal measures to ensure SMEs are not continually exposed to upstream insolvency”, commented ECA Director of Business Paul Reeve.

Both ECA and BESA have long called for reform to unfair payment practices within construction. Carillion was widely known to take over four months to pay suppliers, despite 30 day payment being industry good practice. To tackle this slow payment, the two trade bodies are calling on the Government to pay small and medium-sized businesses directly, using ‘project bank accounts’.

BESA and ECA are also supporting a Bill tabled by Peter Aldous MP, which is currently going through Parliament. The Bill will prevent clients and main contractors, such as Carillion, from using their own accounts to store money held back from suppliers in case of defects – ring-fenced, independent accounts would be used instead. 

26 January 2018

Comments

Already Registered?
Login
Not Yet Registered?
Register
ACR News

Final Hackitt Review demands 'fundamental reform'

Industry has responded to the findings of the Independent Review of Building Regulations and Fire Safety, published today, as Dame Judith Hackitt declares that fundamental reform is needed to improve building safety and rebuild trust among high-...

  17-May-2018

Bob Smith bolsters Hamworthy Heating sales team

Boiler manufacturer and hot water specialist Hamworthy Heating has welcomed Bob Smith to the sales team for South and West Yorkshire, including Sheffield and Leeds....

  08-Jun-2018

Ideal Commercial Boilers Condensing Range Covers All Bases

Ideal Commercial's Condensing Boiler range provides you with an almost unparalleled span of models and outputs. Featuring wall hung, floor standing, modular and pressure jet boilers with outputs from 30kW to 1450kW, there's an Ideal Commercial boiler suitable for most projects, many with FREE Commissioning.
  08-Jun-2018
Heating & Ventilating Review is the number one magazine in the HVAR industry. Don’t miss out, subscribe today!
Subcribe to HVR

Jobs

Sales Agent (UK-based)

Italian-certified OEM company, specialising in brass fittings (turned or hot-forged), is looking for an experienced UK-based sales agent to run the UK market....

Diary