The after-effects of Carillion

Carillion’s collapse is already sending shock-waves through the industry even before the whole picture has emerged.  What we know so far is that an estimated 30,000 subcontractors are thought to be owed more than £1bn, and due to the huge pension deficit, no one is likely to see a penny of this.  Specialist contractors have started making redundancies and reviewing their plans for 2018.  Some will struggle on.   Others won’t survive.

Incredibly, it is now being reported that the banks are beginning to put pressure on these companies, restricting their credit and access to cashflow, fearful of the knock-on effect.  This adds insult to injury for SMEs who undertook the subcontract work in good faith.  When Carillion extended its payment terms to 120 days, many of these businesses simply had to bite the bullet and accept the change, rather than lose one of their biggest clients.  Unless the banks now start to show some leniency, and allow these firms time to assess their losses and restructure accordingly, many more will fail.

For the companies that do manage to continue, how do they get back on track?  Will they be looking to recoup some of their losses by increasing fees?  Balfour Beatty and Galliford Try have also suffered severe losses from this; what will be the impact on their long-term plans, and on direct and in-direct jobs?

At this stage, we have no idea of the true fall-out from Carillion’s failure, but the ripples will continue to be felt throughout the industry and beyond for many years to come.

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