More company failures 'inevitable' following collapse of Carillion

You will have seen that Carillion went into compulsory liquidation on Monday this week after failing to secure continued support from its banks.  As the UK's second largest construction company it had 29,000 employees, 30,000 subcontractors and its tentacles stretched far and wide across the UK economy.

Carillion's joint venture partners are probably big enough to weather the storm but smaller construction companies that are at the end of the payment chain will be hit hardest and face a heightened risk of going out of business.

Most of Carillion's work was done by hundreds of large subcontractors.  Many of these will be locking their cheque books up and not paying their own subcontractors of which there will be thousands.  As Carillion was typically paying on 120 day terms for some subcontractors cashflow is set to get progressively worse for months to come.  This pervasive effect means there will be many smaller contracting companies which never actually worked for Carillion that will struggle and get paid for the work they have done.

As always we are on standby to help you guide any clients that might be affected by the Carillion collapse.

Andrew McTear
18 January 2018

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