Carillion update

With the news sinking in of Carillion’s demise, the government is moving quickly to assure contracts, and sub contractors working with the beleaguered company, will be supported.

Following a meeting with leading construction and trade bodies to discuss the liquidation of Carillion, the Business Secretary has also confirmed he has asked Insolvency Service to fast-track an investigation into Carillion’s directors and broaden the scope to include those directors previously employed.

Following the appointment of the Official Receiver as liquidator, the Business Secretary has written to the Insolvency Service and the Official Receiver asking that the statutory investigation into the conduct of Carillion’s directors is fast-tracked and extended in scope.

The Official Receiver’s investigation will now also consider whether those who are, or were previously directors of the company may have caused detriment to those owed money, including workers and businesses affected.

Alongside this, the Business Secretary has also written to the chairman of the Financial Reporting Council (FRC), Sir Win Bischoff, and asked it to conduct an investigation into the preparation of Carillion’s accounts past and present, as well as the company’s auditors.

Greg Clark said: “It is important we quickly get the full picture of the events which caused Carillion to enter liquidation, which is why I have asked the Insolvency Service to fast-track and broaden the scope of the Official Receiver’s investigation.

“In particular, I have asked that the investigation looks not only at the conduct of the directors at the point of its insolvency, but also of any individuals who were previously directors. Any evidence of misconduct will be taken very seriously.”

The Business Secretary has also chaired a meeting with leading business and construction trade bodies, who are representing Carillion’s sub-contractors and the construction sector.

A meeting will also be held with the General Secretaries of the TUC and Unite, Frances O’Grady and Len McCluskey, to discuss the impact on employees affected by Carillion’s insolvency.

The Rt Hon David Lidington CBE MP said: “It is regrettable that Carillion has not been able to find suitable financing options with its lenders but taxpayers cannot be expected to bail out a private sector company.

“Since profit warnings were first issued in July, the government has been closely monitoring the situation and has been in constructive discussion with Carillion while it sought to refinance its business. We remained hopeful that a solution could be found while putting robust contingency plans in place to prepare for every eventuality. It is of course disappointing that Carillion has become insolvent, but our primary responsibility has always been keep our essential public services running safely.

“We understand that some members of the public will be concerned by recent news reports. For clarity – All employees should keep coming to work, you will continue to get paid. Staff that are engaged on public sector contracts still have important work to do.

“Since its inception in the 1990s private finance has helped to deliver around £60Bn of much-needed capital investment in infrastructure in the UK across a range of projects and we will continue to maintain partnerships with responsible firms in future.”

However, it was also announced that firms working for Carillion will only have two days of government support. With only minimal support from the government to employees and small businesses, it is the supply chain that will suffer heavily in this situation.

Iain McIlwee, CEO British Woodworking Federation, said: “The British Woodworking Federation (BWF) represents the UK’s £3.8Bn woodworking sector, a craft at the heart of the UK’s construction sector, which employs approximately 60,000 people around the country.

“As the news of the liquidation of Carillion breaks, it is almost ironic that we are putting our final comments in on the Government’s consultation into retention payments in the construction industry. This debate is not about whether the state should bail out Carillion, but whether Government can in all conscience turn its back on a supply chain of SMEs who will end up carrying the can for poor procurement, bad business management and an endemic failure by the Government to address some of the archaic procurement practices surrounding late payments and retentions that place risk unfairly on SME sub-contractors. Many of the creditors are SMEs and the sums, whilst likely to be significantly lower than the liquidators will take, could define the future of these businesses – it would be a gross injustice if their money unfairly held is lost in this process.

“Frankly to my mind the Government is complicit in the sorry saga that is unfolding and we need decisions fast. As a short term we need to see some security against these retentions and unjust payment clauses. Moving forward we urge the Government to develop a structured and more consistent legislative process to deal with market failures, be they banks, construction firms or steel manufacturers. We cannot rely on arbitrary decision making and political posturing. There needs to be clear process to ensure those responsible foot the bill and ensure society and supply chains do not suffer unduly. The Government consistently fails to recognise the stress of running a small business and keeping people employed – a lot of business owners in this supply chain won’t be sleeping soundly until this is resolved.”

While Federation of Small Businesses (FSB) National Chairman Mike Cherry, said: “It is vital that Carillion’s small business suppliers are paid what they are owed, or some of those firms could themselves be put in jeopardy, putting even more jobs at risk besides those of Carillion’s own employees.

“These unpaid bills may well go back several months. I wrote to Carillion back in July last year to express concern after hearing from FSB members that the company was making small suppliers wait 120 days to be paid.

“Sadly these kind of poor payment practices are all too common among some big corporates. Perhaps if they weren’t it would be easier to spot the warning signs of a huge company in financial trouble.

“When the dust settles on this sorry saga, there is also a wider lesson to learn about the concentration of public contracts in the hands of a small number of very big businesses. Public procurement must be much more small-business friendly, in which it is easier for small firms to navigate the system and the Government should prioritise meeting its target of at least one third of taxpayer-funded contracts going to smaller firms.”

 

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