Carillion’s 4 month payments terms were infamous so subcontractors were used to receiving a (very) delayed payment prior to the collapse. February will mark the month when creditors really begin to feel the effect of Carillion’s insolvency as no payment will be received on their October 2017 invoices which would have ordinarily now reached their payment date.
As the cashflows of Carillion’s subcontractors deteriorate, we will see the effect spreading. Ie, the sub-subcontractors will then begin to feel the knock on effect with the pain spreading to a huge swathe of those working in the construction sector.
This means that from February, the collapse of Carillion will begin to noticeably impact SMEs. This effect will be magnified in March, April and May when the next tranches of outstanding invoices are not paid and the normal flow of cash through Carillion’s supply chain dries up.
It is clear that the projects such as HS2 on which Carillion and its subcontractors worked will ultimately continue. Most likely, one of Carillion’s former competitors will take on a selection of contracts and those subcontractors already on site will continue to be engaged. This means the subcontractor will still have a good (profitable) future work flow. Their problem will be highlighted by a deterioration on their cashflow through the next quarter.
If pre-emptive measures are not taken, the Carillion supply chain will slowly collapse with your clients among them. A lack of prompt action could leave a director of a subcontractor open to a claim of trading whilst insolvent with the associated risk of assuming personal liability for company debts.
Gibson Hewitt are a firm of Insolvency Practitioners and able to help. A Company Voluntary Arrangement, (“CVA”), is an incredibly adaptable tool to help a profitable company survive after a one-off event renders the Company unable to pay its liabilities as they fall due.
Contact Lynn Gibson on 01932 336149 for more information or to arrange an initial FREE meeting at which we can explain their options.