Fears have been voiced that the sinking of UK giant Carillion yesterday could drag many other smaller companies down with it as they face liquidity crises over unpaid invoices.
The UK government has said public sector contracts would be honoured, but private sector contracts are expected to be wound up tomorrow, with companies owed funds to be treated as creditors of Carillion.
Shares in geotechnical engineer Van Elle fell today after it revealed it was owed £1.6m from Carillion for rail improvement and maintenance work, and was counting on Carillion contracts for £2.5m in revenue this year.
The company said failure to recover any money owed will create a negative financial effect.
Yesterday plant and tool hirer Speedy said it was owed £2m from a total revenue of £12m with Carillion in the last 12 months.
As many as 30,000 UK businesses were owed in the region of £1bn in unpaid invoices, putting thousands of jobs and pensions at risk, newspaper The Daily Telegraph reported today.
Trade associations said Carillion’s collapse could have a "catastrophic" effect on smaller companies that worked for the firm.
The Building Engineering Services Association (BESA) and the Electrical Contractors’ Association (ECA) said there was "growing alarm that much of this money will be lost leaving many more firms at risk of financial collapse", reports Construction Manager.
"Carillion’s move into liquidation places their huge supply chain at risk of losing millions of pounds, which will threaten companies and jobs," said ECA director Paul Reeve. "While this is a clear and present disaster for construction and wider maintenance, the question will ultimately follow, why did Carillion appear so attractive to clients even as they moved towards collapse?"
Another company, landscaping and horticultural services company Flora-tec, is owed almost £1m by Carillion for work carried out in November and December at schools, hospitals, prisons and courts.
"We’ve got a profitable business but we can’t trade out of a black hole of £1m," its managing director Andy Bradley told newspaper The Guardian. Adding that he felt "duped and betrayed" by the government, which handed Carillion new contracts despite the company issuing two profit warnings last summer.
Image courtesy of Carillion
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