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Carillion crisis: Banks' help 'no more than a sticking plaster'

By Pete Madeley | Business | Published:

Help offered by banks to businesses left in the lurch by Carillion's collapse will be no more than a 'sticking plaster' solution, industry representatives have warned.

Business Secretary Greg Clark has said support from a Government-led task force and the banks will 'maximise continuity' for small businesses.

But Mike Cherry from the Federation of Small Businesses said it was unlikely to be enough for most contractors.

It is thought that up to 30,000 smaller firms may be owed money by Carillion.

Wolverhampton-based Carillion, which operated projects from cleaning prisons to building roads, went into liquidation on Monday with debts of around £1.5bn.

It employed 20,000 workers in the UK, and much of its work was contracted out to smaller operators, many of whom are waiting to see if they will paid for work completed in recent weeks and months.

Three banks have said they will provide £225m to provide 'tailored support' for small business customers, including capital repayment holidays on loans, help with fees and increases in overdraft limits.

But Mr Cherry said the support did not go far enough.

FSB policy chairman Mike Cherry

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"It is only going to be a sticking plaster to help those who are viable to continue in business and recover in time," he said.

"We all need to understand that it is very unlikely - as in any administration or liquidation - that those who have already invoiced Carillion up to the announcement on Monday are going to get anything out of this at all."

Business Secretary Greg Clark said the question of whether firms would receive money owed for work they had completed on contract for Carillion 'was a question for the Official Receiver'.

Mr Clark would not confirm the number of affected businesses.

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"There's an exercise going on, quite rightly constructively, to make sure that all of the contractors are identified, that they are given the assistance from the banks which has been very important, but also since most of these contracts were profitable, that they can be re-assigned and they can continue."

He insisted that Carillion's failure should not be used as a justification for ending the system of private sector provision of public services.

"Most of the time these services are delivered successfully," he said.

"What happens sometimes in private businesses is that mistakes are made by the management and bankruptcies happen. That is part of what happens when you contract to the private sector."

Meanwhile official data from Whitehall shows that no senior UK government ministers met with Carillion in the months after its first profit warning in July last year.

The Government awarded six more contracts to the firm in the same period –including a HS2 contract – despite concerns over the firm's financial health.

The data shows that between July and September there were no meetings between Carillion and any ministers from the Cabinet Office, the Department for Transport or the Ministry of Defence.

Data for September to December is yet to be published.

Pete Madeley

By Pete Madeley
@P_Madeley_Star

Political Editor for the Express & Star. Responsible for local and national political stories, opinion, comment and analysis.

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