A Carillion reasons why…

January 26th, 2018
26 January

We are still in the early days of Carillion’s collapse. However, across Staffordshire, accountants are talking with the owners and directors of their client companies affected by the collapse of Carillion. Collectively, they are trying to assess the immediate impact on trading and cash-flow but they should also be looking further down the line at the effect on longer-term survival.

As I pointed out in my last blog there were many SMEs already struggling with the small rise in the bank rate last November.  Since then there has been speculation that the Bank of England will look at TWO further rate rises this year, one of them as soon as late Spring. 

For those companies already struggling with tight margins, a bank rate rise to, say, 0.75% this year would probably knock them over. Accountants who have ‘Carillion companies’ in this position will be assessing the likelihood of those companies being able to trade through this crisis. Delaying ‘that meeting’ may not only be delaying the inevitable but may also lead to greater challenges later on.

It is the accountants, however, who will be doing the number crunching and working with their client companies to look further down the road and see what the future may hold. My role as an Insolvency Practitioner could be invaluable in helping with this.

Factoring in another one or two rises in the bank rate must be a crucial part of their deliberations. It is entirely possible that the next Monetary Policy Committee meeting in February 2018 could see a further rise in the Base Rate.

The good news is that both the Government and the banks are doing their bit to help. So they should.  This is a company that owes more than £800million to a supply chain that has literally thousands of companies in it and had taken to paying its bills on a 120-day basis. Thousands of suppliers and sub-contractors are at risk.

The Federation of Small Businesses (FSB) had called for payment protection for Carillion’s small suppliers and sub-contractors saying it is vital that small business suppliers are paid what they are owed or they could be in jeopardy. The FSB fears that Carillion’s unpaid bills are likely to stretch back several months at least.  Other national trade bodies have called for small business contractors already working on Carillion projects to be allowed to continue to work and for the Government to insist that public sector contracts adopt an on-time 30-day payment supply chain model.

Staffordshire Chambers of Commerce has pledged to support businesses affected by Carillion’s collapse. The Chambers’ chief executive Sara Williams said: “The liquidation of Carillion is terrible news and brings with it a period of great uncertainty. This will be a difficult time for employees, contractors and businesses that worked with Carillion.

“Staffordshire Chambers is committed to supporting those affected, working alongside chambers throughout the Midlands region and beyond.”

Lloyds has launched a £50 million emergency support package for small businesses in Carillion’s supply chain. Barclays in Staffordshire has set up a dedicated helpline to provide additional support for its clients. So, there is a lot happening nationally and locally.

More information on help can also be found at https://www.pwc.co.uk/services/business-recovery/administrations/carillion.html which is a direct link to a dedicated web page maintained by the Special Managers of Carillion. It is particularly helpful as an initial source of information for, in particular, employees and suppliers of the companies in liquidation.

Alternatively, just contact me at help@ipd-uk.com or on 01782 594344 and we can start to have those initial discussions on the best way forward for clients.