Minggu, 04 Februari 2018

Carillion’s fall will bring down more construction firms, say accountants

The collapse of Carillion is expected to trigger a rise in the number of construction companies going bust as subcontractors in its supply chain miss out on payment, a leading accountancy firm has warned.
Insolvencies in the construction industry increased by 8% to 2,633 last year, according to figures from the

Insolvency Service, which is managing the liquidation of Carillion.

Insolvency experts at accountants Moore Stephens predicted a further rise in the number of business failures, pointing to the difficulties faced by firms in a sector in which profit margins are typically low. Lee Causer, a partner, said the collapse of Carillion could exacerbate the increase

The forecast comes days after monthly figures for housebuilding activity showed the first fall since just after the EU referendum, with experts warning that the building industry has been rattled by Carillion.

Carillion’s former bosses will be questioned by MPs on Tuesday about their management in the run-up to its collapse last month under a mountain of debt as part of a joint inquiry into the collapse by the business, and the work and pensions select committees.
Richard Howson, who quit as chief executive after the firm’s first profit warning in July, – and Philip Nevill Green, who was chairman, are among those called to give evidence.

Last week the Federation of Small Businesses accused Carillion of abusing its dominant position to force suppliers to accept late payment.

Causer said: “Carillion has already left a huge number of subcontractors out of pocket, when they are already facing enormous financial pressures. The fall of Carillion could be the trigger for even more construction companies going under.

“Profit margins in construction are already very tight and late payment of subcontractors is now standard procedure for far too many in the sector.”

The number of days that construction firms are waiting on average for payment has risen from 52 five years ago to 69, according to research from small business finance company Funding Options.
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