Will the Carillion collapse affect your build? - Pure Construction

Will the Carillion collapse affect your build?

At the end of 2017, Carillion was the UK’s second largest construction company with contracts to build, renovate and maintain buildings across the UK, including many schools and hospitals. Just a few weeks into 2018 and the company has gone into liquidation, leaving many of their 43,000 employees (around 20,000 in the UK) out of work and unpaid. As this shock reverberates around the UK construction industry, many people are asking: will the Carillion collapse affect my project? Will my build be delayed? Will the company I trusted go bust too.

Speaking for ourselves

While it’s hard to predict the full impact of the Carillion collapse at this early stage, we can tell you what’s happening here: we’re not in any way linked to Carillion and see no reason why its troubles should directly impact the building projects we have underway or have projected for the future. We are, however, watching the situation develop as we prepare to weather whatever storm the collapse of this giant creates in our industry. We have strong roots in our local community and are hoping that, as the financial knots are untangled, the human face of construction isn’t forgotten and provision is made for those out of work through no fault of their own.

Why is the Carillion liquidation affecting other companies?

When it went into liquidation on 15 January 2018, Carillion owed money to an estimated 30,000 other companies, including many small firms. As a construction company, Carillion will have worked with both specialist and general builders as well as manufacturing and supply firms. For many small businesses, a contract with an industry giant like Carillion may be the majority of their revenue. As an example, if you imagine deciding to build a shed in your garden, even if you are a skilled carpenter and joiner, you might hire a digger and driver for the day to create the foundation; order concrete to pour; order timber, a door, windows, electrical cabling and other supplies; book an electrician to fit the light and power sockets; and so on. If you go bust before paying the invoices due, then all these companies take a knock on.

How many companies will the Carillion liquidation cause to collapse?

It’s impossible to say, at this point, exactly what the knock on damage will be. The BBC reports that it has been contacted by the directors of smaller firms worried that Carillion failing to pay their bills will cause them to collapse. Many construction firms are unable to hold a large cash supply, so if they are not paid for their last job they cannot buy materials for the next one – it’s like having to wait several months for a paycheck. You may be able to scramble around and do it once or twice, but if your pay is 6 months behind, most people will be in serious difficulties. Fortunately, several banks have begun to create rescue funds to assist companies in exactly this circumstance so hopefully further job losses can be prevented.

Companies unaffected by the Carillion liquidation may also find themselves worse off as part of the domino effect: if Carillion didn’t pay company A and it goes into liquidation and can’t pay company B then company C may not get paid by B… Moreover, as individuals and companies watch the turmoil, many will decide to wait it out before starting a new building project, further shrinking the market.

Of course, this is only generalised information. If you are concerned about a particular project you have underway, you need to speak to your building contractor and possibly increase your insurance to ensure that you are covered even if the worst happens.

What’s happening to Carillion projects?

A construction giant, Carillion had a hand in numerous projects across the UK, including the building of 2 new hospitals and at least one major road project. Whether construction continues depends largely on if there is anyone else to pick up the slack and pay the workers. Where Carillion was working in partnership with another large firm, such as on the HS2 rail link, Carillion workers may find themselves either offered a new job on the same site or unemployed while other work on the site continues. Some projects have been shut down entirely with staff told to take their own tools and go home. Workers across the UK report being laid off without being paid as their employers have not been paid by Carillion so are unable to pay their staff.

As Carillion was also a major service provider, offering cleaning, food provision and other essential services to schools, hospitals, prisons and transport networks, the government priority seems to be ensuring that these services are maintained, leaving construction workers and their problems for a later date. In an industry where many workers are employed on a casual basis and only paid when there is work to do, these seems short sighted and likely to push both companies and families into extreme hardship.

SOURCES

https://www.bbc.co.uk/news/business-42666275

– https://www.theguardian.com/business/2018/jan/15/carillion-fallout-deepens-as-workers-face-pay-being-stopped-in-48-hours

– https://www.bbc.co.uk/news/business-42729093

– https://www.theguardian.com/business/2018/jan/15/jobs-carillion-liquidation-construction-hs2

– https://www.bbc.co.uk/news/business-42690807

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