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Gloucestershire Business News

Carillion collapse latest - fears for small suppliers

Following the news today that construction giant, Carillion, is going into liquidation, threatening thousands of jobs, the Federation of Small Businesses (FSB) says the company's small suppliers must be paid.

FSB National Chairman Mike Cherry (pictured), said: "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.

"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 government has assured the public that work on Carillion's big public sector contracts will continue.

The Rt Hon David Lidington CBE MP said: "It is regrettable that Carillion has not been able to find suitable financing options with its lenders, but taxpayers cannot be expected to bail out a private sector company.

"Since profit warnings were first issued in July, the government has been closely monitoring the situation and has been in constructive discussion with Carillion while it sought to refinance its business. It is of course disappointing that Carillion has become insolvent, but our primary responsibility has always been keep our essential public services running safely.

"All employees should keep coming to work, you will continue to get paid. Staff that are engaged on public sector contracts still have important work to do."

Despite this, the news will certainly have come as a huge shock to Carillion's many workers.

David Birne, insolvency partner at chartered accountants H W Fisher & Company comments: "For a company Carillion's size, it is extremely rare to opt for a liquidation rather than an administration. It suggests there is little, if anything, of value within the company to be saved. For Carillion's 43,000 global staff, liquidation means the immediate risk of redundancy.

"The fact Carillion has opted for a compulsory liquidation suggests the directors of the company may have sought to expedite the process rather than leave their workforce in limbo - and unpaid - for six weeks.

"In this way, at least some of its employees can be moved over to other contractors, particularly where they are working on government contracts, such as HS2 and Crossrail, but there could still be many thousands of workers left looking for a job only three weeks into the new year."

Mike Cherry added: "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. 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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