Carillion: When a Big Firm Goes Under, What Happens to the Suppliers?

By 22nd January 2018 Uncategorised

The collapse of Carillion, the second largest construction contractor in the country, has sent shockwaves through the financial sector leaving many subcontractors facing a financially uncertain future. There is help and support available, however, in the form of an Insolvency Practitioner. Insolvency Practitioners can provide a range of services, from advice and analysis to reshaping or liquidating the threatened company. They are, in short, the first port-of-call for any company whose financial situation is sliding out of control.

After the Carillion share price collapsed, the company entered compulsory liquidation which will have a significant and long-term effect on many government and private construction projects. Perhaps the greatest damage will be to the small scale Carillion suppliers who relied on the company for their survival. One industry source estimates that anything up to 30,000 firms may be affected and owed money that they may struggle to see paid.

Carillion was a colossal company and held both private and public contracts. These included projects that ranging from the HS2 high speed railway to smaller infrastructure developments. This means that many smaller firms will be affected by the Carillion collapse and, whilst the government contracts will be protected, the private sector contracts are not protected in the same way, so the smaller companies involved, are at a greater risk.

When a company like Carillion collapses, what can the small supplier do?
Peter has a number of contracts with Carillion, in fact over 70% of his business comes from his relationship with Carillion. The liquidation leaves Peter and his company particularly vulnerable. He is left with balances due to him as a subcontractor, and these balances will most likely need to be written off which will leave Peter not only out of pocket, but more importantly, result in his small company being threatened financially.

Peter might apply to the administrators for compensation but this is likely to be low and will not guarantee his companies survival. His best course of action will be to contact an Insolvency Practitioner as soon as he can.

The first thing an Insolvency Practitioner can offer is advice. This cannot be underestimated in a time of uncertainty and change, getting that advice can be a moment of clarity that both reassures and begins the process of getting the situation under control.

In the short term, when, as so many will following the liquidation of Carillion, the finances of a company spirals out of control, an Insolvency Practitioner can work to control this by halting creditor action. In the longer term, they can analyse the company’s financial situation to assess what the best course of action may be.

These solutions may range from voluntary liquidation, which would mean the end of the company and allowing the potential directors a clean break, without debt, to move on from the situation, to refinancing or restructuring, helping the directors to retain their company but reshape it to survive, and ultimately clear, the debt. They may also suggest a voluntary arrangement with creditors that will allow a company to pay off debts with monthly instalments and potentially avoid liquidation.

An Insolvency Practitioner can offer control and relative stability at a time when control and stability are in short supply; they can, in short, offer peace of mind. An Insolvency Practitioner can help a company to through liquidation or restructuring, to ensure that employees are able to claim for unpaid salaries, to relieve the pressure of any debt recovery or court judgements and to stop the HMRC chasing directors for payments.

In short if a company is under threat following the collapse of Carillion, an Insolvency Practitioner is the place to go for expert advice.