Carillion blamed for Q1 spike in UK construction insolvencies

Carillion’s collapse triggered a 20% spike in the number of UK building firms becoming insolvent, a report says.

A total of 780 companies in the industry ground to a halt in the first quarter of 2018 after the country’s second largest construction firm was forced into liquidation in January.

That is a one-fifth increase over the same period in 2017, according to analysis by accountancy firm Moore Stephens.

Thousands of subcontractors lost contracts as a result of Carillion’s demise, and had racked up sizeable debts under the favoured firm’s punishing payment regimen, Moore Stephens said.

"The collapse of Carillion sent shockwaves through the construction sector, and we are seeing more insolvencies as a direct result," Lee Causer, spokesman for Moore Stephens, told newspaper The Guardian.

"Large construction companies are infamous for squeezing the profit margins of the contractors and subcontractors who work for them. These contractors often cannot negotiate against the terms set for them by their larger clients."

Specialist subcontractors had been left particularly vulnerable.

"Many of them will have relied on the giant for significant amounts of their work," Causer said. "It is also likely that these subcontractors would have had to write off virtually everything owed to them by Carillion."

Image: Thousands of subcontractors lost contracts as a result of Carillion’s demise (Carillion)

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  1. Carillion had become too big to be ‘allowed to fail’ and thus needs to be bailed with public funds. Result of one going down has domino effect and takes down others.

    The same thing happened when the banks/financial institutions had to be bailed out in the past in UK/USA/EU and some other countries when they failed as they were deemed to be too big to be allowed to fail.

    In almost all cases those responsible for the disasters may not have been given deterrent punishments possibly due to their status and connections with those in power and almost all may have continued to enjoy the fruits of their suspected abuse of power and lived in luxury while the citizens suffered.

    Gives the perception that WHITE COLLAR CRIMES DO PAY and this may be the reason why it may be expanding as may be indicated by the several international independent fraud/corruption surveys by professional organizations. Cannot even call for divine help as even most Almighties may be with them.

  2. This is exactly why organisations in this sector should not be allowed to expand beyond a certain size in my opinion. We have the ‘big 6’ just like in the food retail sector that destroy the possibility of competition and manage to be awarded huge contracts they simply pay lipservice to, rather than making the projects good, maximise profits through cheap labour and competitive tendering, and then take an ice-age to pay, and that’s a big enough set of issues without the corporate big wigs sending those companies to an early grave through bad management which then causes administrations, redundancies and unnecessary heartache for people – people being the forgotten element in all of this.

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