Carillion ‘was making small contractors wait 120 days to be paid’

The Federation of Small Businesses has called on the government to ensure that Carillion’s small business suppliers are paid what they are owed, as its chairman revealed he wrote to the construction firm last year over its “poor” payment practices.

Carillion went into liquidation yesterday morning after reportedly running up debts of £1.5 billion. Its collapse has sparked concerns that contractors working with the business will be left out of pocket.

The fears come as it is claimed that some contractors have waited up to four months to be paid.

FSB national chairman Mike Cherry is worried that Carillion’s plight could have serious consequences for members of its supply chain.

“It is vital that Carillion’s small business suppliers are paid what they are owed, or some of those firms could themselves be put in jeopardy, putting even more jobs at risk besides those of Carillion’s own employees,” he said.

“These unpaid bills may well go back several months. I wrote to Carillion back in July last year to express concern after hearing from FSB members that the company was making small suppliers wait 120 days to be paid. Sadly these kind of poor payment practices are all too common among some big corporates. Perhaps if they weren’t it would be easier to spot the warning signs of a huge company in financial trouble.”

The Catering Equipment Suppliers Association said yesterday that it was looking to gain a clearer picture of events as it revealed it would be “lobbying” the government as part of attempts to minimise any negative effects on the catering supply chain. 

Given the number of high profile projects that are at various stages of completion, the operational issues relating to existing contracts, and the equipment service agreements, CESA said it was “vital” that the interests of its members were protected.

Carillion was the UK’s second largest construction firm. It is understood to have public sector or public/private partnership contracts worth £1.7 billion. It provides meals to more than 200 schools and provides nearly 20,000 hospital meals a day.

Mr Cherry said its demise had also exposed the vulnerabilities of the public procurement process.

“When the dust settles on this sorry saga, there is also a wider lesson to learn about the concentration of public contracts in the hands of a small number of very big businesses,” he said. “Public procurement must be much more small-business friendly, in which it is easier for small firms to navigate the system and the Government should prioritise meeting its target of at least one third of taxpayer-funded contracts going to smaller firms.”

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One Comment;

  1. Malcolm said:

    I wonder how much “unpaid small suppliers debt” increases the actual total debt that Carillion is currently laying on the table.
    Pensions black hole – Again and again we see that these large companies have been dipping into the pension pot. Pension pots should be ring fenced away from prying hands of any company. Hopefully this Carillion fiasco will finally make Parliament sit up and take stock of what is going on, likening this to the past banking fiascos “Where lesson were learnt” It’s the small businesses and workers that are going to suffer the pain, not the smug Directors at the top.

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