The effect of the collapse of Carillion, the Goliath construction company which won the Government’s HS2 Project, and which also managed infrastructure schemes, military contracts, hospitals and schools leaves shockwaves in the construction industry which are yet to settle. The enormity of its demise is all too clear; Carillion employed approximately 20,000 and it is estimated its debts to ordinary creditors exceed £900M and had a pension deficit of approaching £600M. As with any large-scale liquidation the knock-on effect to other businesses will be severe with little likelihood of any recovery for unsecured creditors.
Carillion’s 120-day payment terms will prove disastrous to many small to medium -sized enterprises, with the ripple effect causing financial problems to their businesses and onto their own supplier.
Many small businesses who have been forced to act as a “Bank” to Carillion will need to act quickly. In the worst-case scenario, they will themselves face insolvency. To survive businesses will have to ensure that their other customers pay outstanding debts, as construction businesses clamber for cash and survival and will need to ensure that they are first in the queue to have new debts paid.
Carillion used 30,000 sub-contractors which included cleaners, carpenters, plumbers, engineers and technicians. Those businesses need their credit control departments to adopt even firmer procedures. Where swift recoveries are not made, businesses will need to escalate recovery through a specialist commercial debt recovery solicitor at the earliest opportunity, with Letters of Demand and Winding-up Petitions putting them at the front of the queue. Directors of businesses which may not survive also need financial advice from lawyers or insolvency practitioner at the earliest opportunity to consider their ability to continue trading and survive through re-structuring.
Stripes offer a no win – no fee commercial debt recovery service and are recommended by the Legal 500. Stripes have successfully recovered debts from Carillion and other construction businesses, on behalf of its clients, over many years. If your company has debts which you need to collect, or you otherwise need advice then please contact us on 0161 832 5000.