Despite crisis talks with government over the weekend, a major UK-based construction concern, Carrilion, has ceased trading with outstanding debts estimated to be £1.5 billion. The company is the second largest UK-based construction company with 20000 UK employees and a global workforce of 43000.
Carillion has been heavily involved in so-called PPPs, Public Private Partnerships, which involves private companies picking up public construction and maintenance projects for the state sector. These activities have seen Carillion’s involvement in a wide range of UK activities including construction of hospitals; roads; maintenance contracts on military accommodation and prisons; redevelopment projects, including the prestigious redevelopment of London’s Battersea Power Station; infrastructure projects such as HS2; and the provision of school meal services and even hospital beds.
Needless to say, it works with a vast web of sub-contractors many of which are small businesses whose own survival may be threatened by the Carillion bankruptcy, threatening even more jobs and the delivery/servicing of numerous PPP projects across the country. To give an idea of the scale of the problem Build UK, a UK trade body, estimates that between 250000 and 300000 are currently owed money by Carillion. Many of these firms are unlikely to be paid which could cause a knock-on effect further down the supply chain. In 2016, Carillion spent £952 million on sub-contracts and with UK suppliers, it is not clear exactly what the unpaid bills to these other companies in the UK currently amount to.
The government has said that contractors working on public projects for Carillion will be paid, but those on private contracts were only granted such protection for 48 hours. Many sub-contractors will be reluctant to work under these terms unless mechanisms are established to pay them directly from the public coffers since they would be at the back of the que as Carillion creditors.
There is likely to be some political fallout from the government’s handling of its Carillion contracts as accusations that it continued to award billion Pound contracts whilst aware that the company was in difficulties.