The liquidation of construction and facilities management giant Carillion has been occupying headlines this week with significant focus on the impact to public services including key infrastructure projects and everyday services in schools, hospitals and prisons.
The impact on the wider economy will be huge and will be felt in the coming weeks and months. It is reported that 30,000 businesses throughout the supply chain are likely to be hit with massive losses as a result of Carillion’s collapse.
Initial projections suggest that creditors (those owed money by Carillion) might see less than 1p of every pound they are owed and even that will not be paid for some significant time. This will cause contractions throughout the supply chain, as suppliers begin to tighten credit to protect their core interests, which in turn makes cash-flow much more difficult for other traders in the construction industry and further afield.
The reality is that even businesses not immediately struck by Carillion’s downfall will likely suffer from bad debt, increased costs and shortened credit terms. Unfortunately redundancies and insolvency are significant risks which the wider industry now face.
Of course amongst any uncertainty there are also opportunities. Financially stable businesses will have the chance to pick up new and ongoing projects as a result of turmoil in the sector. Companies that act swiftly to deal with financial risks may be able to ring-fence their core and most profitable work to ensure the sustainability of their businesses.
The government has published advice for those affected directly by the Carillion collapse.
Russell-Cooke has insolvency and construction law experts on hand to assist. We help creditors looking to recover money due or assets held by companies in financial distress as well as businesses facing financial difficulty who need advice on restructuring and insolvency options.