Carillion collapse could cost demolition dear.
Like many allied to the UK construction sector, I spent this past weekend scanning the horizon, hoping and praying for a miracle that might pull industry giant Carillion back from the precipice. Not because I have any particular affinity with Carillion; not because I am especially concerned about the impact upon the HS2 of which the company was set to be a part.
I was not even too bothered about the likely effect of the company’s demise on the schools and hospitals it is charged with maintaining. The current UK government might appear inept at times, but even they are not foolhardy enough to allow the collapse of a construction company to further hinder its chances of re-election by failing to support these two massive vote winning areas of activity. Quite how they explain away allocating a portion of the HS2 contract to a company that seemingly everyone knew was on a financial knife-edge is quite another matter.
Like most people connected to this sector, I had two concerns: the impact upon the 40,000+ Carillion employees; and, moreover, the impact upon the sub-contractors that will bear the brunt of the financial losses amassed by a company that has seemingly been in terminal decline for several years.
It seems likely that, as Carillion slips beneath the murky financial waters, some of its workload – including HS2 – will be absorbed by other, rival firms. In that instance, it seems equally likely that at least some of the firm’s employees might find employment elsewhere in relatively short order. Furthermore, despite the spectre of Brexit that is hanging over the UK economy at present, construction demand remains largely positive. The chances of ex-Carillion employees finding alternative employment are pretty good, all things considered, although the prospects for their pension funds, however, look less certain.
And the same, sadly, cannot be said for the countless sub and specialist contractors to which Carillion is thought to owe millions. Although it will likely take months for the true extent of Carillion’s debts to become clear, it is thought that a number of demolition firms could take a hit. Rumours abound of demolition contractors being owed hundreds of thousands of pounds or more; and there is the very real possibility that Carillion’s sinking could lead to the drowning of several demolition companies.
By all accounts, Carillion was not a particularly good company to work for, either as an employee or as a sub-contractor. Like a number of other big-name firms, it was caught up in the employee blacklisting scandal. Also like several other big-name main contractors, it forced sub-contractors to accept cash-flow crucifying credit terms of 90 and even 120 days.
Those credit terms alone should have run alarm bells with sub and specialist contractors about the financial stability of Carillion. The fact that several other main contractors continue to impose draconian payment terms should now be a red flag to us all.