Supply chain firms across Derbyshire will be impacted by the collapse of construction giant Carillion, a business chief has warned.
The UK’s second biggest construction firm went into liquidation on Monday, after running up losses on contracts and struggling with heavy debts.
The firm employs 20,000 people in the UK – including around 80 at offices in Barlborough, near Chesterfield – and is involved in landmark infrastructure projects such as HS2.
Construction giant Carillion went into liquidation on Monday
While Carillion isn’t directly involved in any East Midlands infrastructure projects, there are many that feed into the region, such as the modernisation of the Midland Main Line south of Corby and the HS2 Phase 1 works.
As such, Chris Hobson, director of policy at East Midlands Chamber, which represents more than 4,100 businesses, says businesses in Derbyshire will be hit.
He said: “There are many local firms, mostly in the supply chain for major projects elsewhere in the country, which will be impacted by Carillion’s collapse.
“The Government has already said that Carillion staff working on Government contracts will continue to be paid but their money will come through the receivers, not from Carillion.
Tomorrow in fact looks bleak for Carillion’s 20,000 workers after the company went into liquidation
“It’s vital the Government acts immediately, where possible, to reassure the small and medium-sized enterprises in Carillion’s supply chain that the projects will continue, their contracts are safe and their workforces won’t suffer as a result of the collapse.”
Among the firms affected is Alfreton-based Collis Engineering. The firm’s sales and marketing director Tom Roberts said: “We had one large contract with Carillion, but it hadn’t reached the high-value stage.
“We are owed a small amount of money, but we’re quite fortunate in that it’s not enough to force any job cuts.
“I suspect other firms won’t be as lucky.”
The latest business news in our area
Toyota Auris news
Rolls-Royce demolition plans
New Co-op latest
According to Andrew Perry, Flint Bishop’s partner and head of construction and engineering, Carillion’s troubles will send a “tremor” through the construction industry and is likely to have a detrimental impact on the wider supply chain.
Writing in the Derby Telegraph’s Business Weekly supplement, Mr Perry says many companies considering how much they are owed, whether they will be able to make any recovery and what impact non-recovery will have on their own trading situation.
He said: “When an event such as Carillion happens it emphasises the need to have tight control of your own cash flow so that you can minimise the damage to your business.
Collis Engineering in Alfreton is owed money from Carillion
“Carillion may or may not be up to date with its payment cycles – we do not know. But if not, and suppliers have been working ‘in good faith’ for a time, these suppliers may feel the effects of Carillion’s insolvency more harshly than others as their exposure is likely to cover a longer period of time.”
Other business leaders in the region have also reacted to Carillion’s collapse.
Ian Hodgkinson, owner of Hodgkinson Builders in Pride Park, said: “Large cash-rich civil engineering contractors used to target Carillion and make a 30 per cent plus margin because they could stand the 120-day payment terms offered by Carillion.
Click to play Tap to play
The video will start in 8Cancel
“This used to then isolate smaller contractors who couldn’t wait out the 120-day payment terms to be paid, who would have probably have been more competitive on price.
“There is a an opportunity for the Government to do things differently here based on the model which the London Underground is following where they act as principal contractors and engage sub-contractors directly, thus cutting out the middle man who suck the margins out of the jobs and contracts.”
And Chris McBride, managing director of Derby-based stonework company Blanc de Bierges, said: “The collapse of construction firm Carillion will mean a worrying time for all involved.
“Whilst some won’t be sad to see them go you have to feel for their employees and supply chain who woke up to the news on Monday morning.”
Check out our new FREE app!
We’ve just launched our very own app for Android and Apple devices which can be tailored to deliver the news and sport that you’re interested in.
To download the iOS app click here.
To download the Android app click here.
Source: Derby Telegraph