It was well documented at the start of the year that Carillion had filed for bankruptcy after it had accumulated spiralling debts, seeing its stock market value plummet by 90 percent. The period leading up to the collapse saw various profit warnings in 2017, leading to a reported loss of £1.15 billion in that year.

The predicament Carillion now finds itself in is perhaps not entirely surprising for business experts who had been keeping a close eye on proceedings following several worrying signs, even before its eventual downfall. PCR had highlighted a few conspicuous reasons for the collapse such as Carillion’s riskier contracts and payment delays in the Middle East. In addition to the above, Carillion had also amassed a £587million pension shortfall - key elements in its eventual demise.

The impact of Carillion’s collapse also had a terrible effect on its employees, with thousands of jobs lost. A subsequent parliamentary report also found that Deloitte – which had received £10million to be the outsourcing company’s internal auditor – had been either “unable or unwilling” to identify failings in financial controls, or “too readily ignored them”. The bill for the redundancy payment alone is also expected to hit £65million, throwing a further “spanner in the works”, with the UK taxpayer expected to feel the brunt of Carillion’s collapse with an estimated £150million bill looming in the background.

The news which filtered out of Carillion earlier in the year was bound to have a negative domino effect on other businesses. No surprise then to learn that there has been a substantial rise in insolvencies, with a 20 percent spike in the number of UK building firms becoming insolvent. A mammoth 780 companies in the construction industry have fallen into insolvency as a result.

The impact of Carillion’s downfall hit hard, with the UK’s second largest construction company being involved in large-scale projects across the UK and internationally, including projects to build roads, schools, hospitals, military bases and rail lines. Indeed 2018 has been a very difficult year for businesses with the Insolvency Service reporting that there were approximately 8,400 new company insolvencies in the first half of 2018 – a rise of 12 percent on the same period last year.

As discussed in an article in January by PCR, following the high-profile liquidation of the company, thousands of subcontractors lost major contracts and were left with substantial debts, with most now having to write of virtually everything owed to them by Carillion. We predicted a bleak outlook for most with potential insolvency looming for many, and a "dark cloud" hanging over the industry. With the recent news emanating about the rise in insolvencies in the construction industry in 2018 – especially as a direct result of Carillion’s collapse, many sub-contractors who relied on Carillion are now facing an uncertain future.

If you are a business owner or director and have been affected by Carilion’s collapse, or are worried about the threat of insolvency, taking regulated early advice and understanding your options will be key for any business affected by Carillion. For more information please contact our PCR Head Office on 0208 841 5252 or alternatively, you can email us at This email address is being protected from spambots. You need JavaScript enabled to view it..

Ahmed Ali
Practice Development Executive 

 

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