Carillion collapse triggers 20pc spike in construction firm insolvencies

Carillion collapse triggers 20pc spike in construction firm insolvencies

A new report has revealed that the collapse of Carillion has triggered the number of UK construction firms going insolvent by 20 percent.

An analysis by the accountancy firm Moore Stephens revealed that 780 construction companies fell into insolvency in the first quarter of 2018 – a fifth higher than the same period a year earlier.

Lee Causer, a spokesman for Moore Stephens, said: “The collapse of Carillion sent shockwaves through the construction sector, and we are seeing more insolvencies as a direct result.”

“Large construction companies are infamous for squeezing the profit margins of the contractors and subcontractors who work for them. These contractors often cannot negotiate against the terms set for them by their larger clients.”

The report suggests that small to medium-sized enterprises and specialist subcontractors were hit hardest.

“Many of them will have relied on the giant for significant amounts of their work. It is also likely that these subcontractors would have had to write off virtually everything owed to them by Carillion.”

Carillion filed for bankruptcy in January after it emerged that the group had debts of about £1 billion – causing shares to plunge 90 percent. 

Following the collapse, thousands of subcontractors were left with debts.

News emerged last week that taxpayers will pay over £150 million following the collapse of Carillion. The bill for redundancy payments alone will reach £65 million.

Earlier this year, a report by the National Audit Office (NAO) expected costs to reach £148 million.

“Doing a thorough job of protecting the public interest means that government needs to understand the financial health and sustainability of its major suppliers, and avoid creating relationships with those which are already weakened,” said Sir Amyas Morse, head of the NAO at the time. “Government has further to go in developing in this direction.”