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.
The two associations say Carillion owes around £75 million to around 80 engineering services firms, but claim that ‘the overall losses are likely to be far higher, given there are thousands of businesses operating in the industry’, with the engineering services sector the largest part of the construction industry by value.
The ECA and BESA says their survey shows that:
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The total value of ongoing contracts with Carillion is £47.2 million, ‘which are now at risk’.
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Micro businesses (those with less than 10 employees) are owed on average £98,000, with one SMEs owed over £250,000.
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Small firms (10-49 employees) are owed £141,000 on average. One of these contractors is owed £800,000 by Carillion.
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Medium-sized businesses (of 50 – 249 employees) are owed on average £236,000, with one such firm owed almost £1.4 million.
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Large businesses (250 employees +) are owed on average £15.6 million. BESA and the ECA say this figure includes ‘Balfour Beatty’s widely reported £45 million loss from joint ventures with Carillion’.
The two bodies added: “BESA and ECA recently 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.”
BESA President Tim Hopkinson, said: “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.”
“These findings underline the need for concerted action from the Government and banks to protect and support SMEs in the construction and services sector,” added ECA director of Business, Paul Reeve. “The Government should also introduce legal measures to ensure SMEs are not continually exposed to upstream insolvency”.
BESA and ECA are also supporting a Bill tabled by Peter Aldous MP, which is currently going through Parliament. They say the Bill will prevent clients and main contractors, from using their own accounts to store money held back from suppliers in case of defects, ‘with ring-fenced, independent accounts used instead’.
