Carillion's demise raises concerns among industry

Published:  15 January, 2018

News of Carillion's liquidation has left industry asking what the impact on SME subcontractors will be, and what changes need to be made to public sector construction contracts.

The Federation of Master Builders (FMB) believes government must learn from Carillion's demise and assess its over-reliance on major contractors.

Chief Executive Brian Berry said: "Carillion's liquidation is terrible news for all those who work for the company and it will have serious knock-on effects for the many smaller firms in its supply chain, some of which will be in serious financial danger as a result of Carillion's demise."

Berry believes government needs to open up more public sector construction contracts to small and micro-firms, by breaking larger contracts down into smaller lots.

This point was echoed by Richard Beresford, Chief Executive of the National Federation of Builders, who agreed that government at both local and central levels should reconsider whether public sector work should go through a framework programme, which can put it out of reach of many regional contractors.

Richard said: "When a major contractor goes into liquidation, it highlights the importance of diversifying those to whom you award contracts. Many large regional contractors miss out on work simply because they are not among the usual suspects."

Iain McIlwee, Chief Executive Officer of the British Woodworking Federation (BWF), said: "This debate is not about whether the state should bail out Carillion, but whether Government can in all conscience turn its back on a supply chain of SMEs who will end up carrying the can for poor procurement, bad business management and an endemic failure by the Government to address some of the archaic procurement practices surrounding late payments and retentions that place risk unfairly on SME sub-contractors.

"Many of the creditors are SMEs and the sums, while likely to be significantly lower than the liquidators will take, could define the future of these businesses - it would be a gross injustice if their money unfairly held is lost in this process. Frankly, to my mind, the Government is complicit in the sorry saga that is unfolding and we need decisions fast."

Iain urged Government to develop a "structured, consistent legislative process" to deal with market failures in any industry, be it banks, manufacturers or construction firms.

He continued: "There needs to be clear process to ensure those responsible foot the bill and ensure society and supply chains do not suffer unduly. The Government consistently fails to recognise the stress of running a small business and keeping people employed - a lot of business owners in this supply chain won't be sleeping soundly until this is resolved."

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