BESA concern for Carillion creditors

UK: Building services contractors’ group BESA is concerned that the impact of Carillion’s collapse on SMEs will create tension with the government’s industrial strategy.

With thousands of specialist contractors expected to take a massive hit following the closure of the UK’s second largest construction company, industry groups have been meeting with government and the liquidators this week to provide greater clarity.

Speaking after a meeting this week with Carillion liquidators PwC, BESA director of legal and commercial Rob Driscoll said: “We are encouraged that HM Revenue and the banks will take a sympathetic, long term approach with specific provision for those hit in the wake of the Carillion crisis. We are however very concerned that the negative impact on thousands of unsecured SME supply contractor creditors will be unsustainable, creating tension with the government’s industrial strategy.”

PwC liquidator David Kelly confirmed they and Carillion will provide suppliers with “commitment letters” that guarantee payment for work undertaken and materials supplied during the liquidation process. However, Mr. Kelly advised that work completed before Monday 15 January 2018 will be treated as “unsecured debt”, and at the back of the queue for payment.

The liquidator also stated that work had been “paused” on many construction sites until the situation could be evaluated, and he was unable to provide a timeframe for if and when work would restart.

Paul Reeve, director of business at the Electrical Contractors’ Association (ECA), who was also at the meeting, said: “We have already heard from hundreds of specialist contractors, across construction and services, who are taking a major hit, and some may not survive. Everybody involved needs to work to prevent a repetition of this situation, and part of that is a legal requirement to pay suppliers promptly.”

The discussions took place during a meeting that was also attended by business secretary Greg Clark MP and small business minister Andrew Griffiths MP, along with a range of other trade bodies including SEC Group, BCSA, Build UK, FMB, CECA and the CPA.

Business secretary Greg Clark confirmed that the banks had committed to provide those affected by the fallout with support and special arrangements. He also noted that HMRC will be taking a “flexible” approach to tax bills, and will provide information on this in due course.

On Monday, BESA and ECA also met with government ministers and officials, including Greg Clark MP, to discuss the immediate aftermath of Carillion’s collapse. During the talks, the two trade bodies called on the government to provide maximum support to businesses affected, and to learn lessons from the crisis and undertake full scale reform of supply chain and procurement practices. The business secretary said that the “construction sector deal” would be an appropriate vehicle to bring about structural change in the industry.