BESA/ECA survey reveals extent of problems caused for supply chain
Engineering services providing gas, fire, heating and ventilation services are owed roughly £75m from construction and services giant Carillion, which formally announced its liquidation last week.
An estimated 80 firms are currently awaiting remunerations from the collapsed company with further financial disruption expected in the construction supply chain, according to findings produced by BESA and the ECA. The figure, which includes a £45m loss from joint ventures between Balfour Beatty and the company, highlights wider industry concerns about further financial difficulties facing the supply chain.
A joint statement on the findings said: “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.”
A total of 133 engineering contractors were surveyed for the findings that warned that some £47.2m of ongoing contracts signed with Carillion were at risk.
Other conclusions from the survey are:
- Micro businesses, classed as groups with less than 10 employees, are owed on average £98,000 from the company. One SME was found to be waiting on £250,000 in payments from Carillion
- Smaller firms of between 10 – 49 staff are waiting on average payments of £98,000 from the group. The largest recorded payment owed was over £250,000
- Medium-sized firms of 50 -249 employees were on average owed £236,000
- Large businesses were found to be waiting for average overdue payment of £15.6m
Back of the queue
Liquidator PwC has said that any private sector work undertaken by Carillion suppliers before the collapse of the company was announced last Monday (January 15) was classed as being unpaid and treated as “unsecured debt”, according to BESA and the ECA. Both organisations were told the outstanding payments would be placed at, “the back of the queue behind other creditors”.
BESA president Tim Hopkinson warned that further financial difficulties were expected in the supply chain based on the survey’s findings.
He 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”.
ECA business director Paul Reeve meanwhile called once again for legislative action from the government to put in place new regulations to prevent SMEs in construction and the service sector from upstream insolvency.
Both organisations have recently supported and helped develop a new bill mandating use of third party deposit schemes for any retentions on construction contracts. The proposed legislation was introduced to parliament by MP Peter Aldous earlier this month.