Express & Star

Carillion subcontractors urged to seek help to stay afloat

Subcontractors and other small firms at risk due to the failure of the construction giant Carillion are being urged to seek professional advice at an early stage to help safeguard their future.

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Chris Radford of R3 is urging firms affected by the Carillion collapse to seek professional help

Chris Radford, Midlands chairman of the insolvency and restructuring trade body R3, says firms which are owed money need to assess what impact it will have on their business and clearly understand their options.

He explained: “Subcontractors and suppliers are usually classed as unsecured creditors, and come behind secured creditors, such as banks, and employees in the queue for payment. Firms are being told to contact the liquidator for information on their specific case.”

Chris Radford, who is also a partner at law firm Gateley plc in Birmingham, says businesses could be affected in a number of ways.

He explained: “For subcontractors awaiting payment for work carried out, there will be an immediate impact on cash flow. They will, of course, still be expected to pay any outstanding labour or materials costs for the work they have incurred or purchased, and make VAT payments due to the Crown authorities. This may, in some cases, include their invoices to Carillion.

“Also in the period ahead there will be an impact on their balance sheet. Bad debts and work in progress may have to be written down, weakening the balance sheet strength. If not risking insolvency, in practical terms it could affect their credit rating, making it harder for them to raise finance. It may also impact on their ability to win future work since in many formal tendering processes, the balance sheet is used as a part measure of their stability.

“Those businesses which might be at risk should take professional advice as soon as possible in order to understand what their best options may be.”