With the news emerging that the UK’s second largest construction company has collapsed - a cloud of uncertainty will start to hover over the possible impact this will have on other construction firms. No doubt, there will also be several other issues which spring to mind including the effect this news will have on sub-contractors and uncompleted projects, as well as its impact on jobs and pensions.

In fact, although the news would’ve come as a complete shock to some, especially to the many thousands of employees who are still employed by Carillion, the announcement is perhaps not all that surprising when you consider the 3 profit warnings released in the last 6 months. Furthermore, it was as recently as September 2017 that the company had reported a loss of £1.15 billion. The report cited Carillion’s riskier contracts and payment delays in the Middle East as major contributory factors. It also revealed that the company had amassed a £587 million pension shortfall, further showcasing severe financial difficulties which appeared to be brewing from within. Its market capitalisation plummeted by almost 80 percent as a result.

It was only a matter of time before the ceiling eventually ‘caved in’. The attention now will be shifted on how this will affect the thousands of workers currently employed globally by the firm, and whether this will result in hundreds if not thousands of job losses. Worryingly, this will not only affect those in the construction industry, but also those working within the energy and utilities sector, as well as, for example, hospital cleaners and prison maintenance staff.

Despite the despair and anguish that todays news may have caused amongst its 43,000 employees, it is conceivable that where Carillion is part of a consortium or joint venture, staff could be moved on to other companies - at least preserving some jobs. Alternatively, if the contracts were taken back into the public sector, staff could be employed directly by the Government or by the health authorities. In the meantime, news that the Government will be underwriting salaries for those directly employed in the public sector will be welcome relief for some.

Those sub-contractor companies owed money by Carillion are unlikely to receive such relief. Their fate at this moment in time is ‘up in the air’, but the question which will be on everyone’s lips is how will these small and medium-sized businesses be able to survive. There is no doubt that many of these companies will see little or none of the amounts owed to them, at least in the short-term.

The bleak forecast now is that there could be turmoil - especially for those sub-contractors who relied on Carillion. Its collapse may trigger several insolvencies across the construction industry, further adding a ‘dark cloud’ over an industry which already has the unenviable reputation of having the highest number of insolvencies per year in the UK. It is clear that the news about Carillion will have hit hard - with the ramifications potentially enormous.

It is therefore inevitable that many further jobs will be at risk and I believe Government intervention at this point appears to be crucial. Politically however, this could be risky as intervention in terms of a private company could set a precedent that the Government would rather avoid.

Whilst uncertainty is likely to last for some time, having seen first hand the impact to the wider business community that even a modest sized contractor insolvency can have, taking early advice and understanding the options will be key for any business affected by the collapse of Carillion. For more information please contact our PCR Head Office on 0208 841 5252 or alternatively, contact us at This email address is being protected from spambots. You need JavaScript enabled to view it..

Ahmed Ali

Marketing & Practice Development Executive 

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