Engineering sector owed £75m after Carillion demise

The engineering sector is owed around £75m following the collapse of Carillion.

A new survey of 133 members of the Building Engineering Services Association (BESA) and the Electrical Contractors’ Association (ECA) found that around 80 of the respondents were suppliers to the company, reports GCR sister site Construction Manager.

These engineering services firms provide services such as electrical, plumbing, gas, fire and security, and heating and ventilation. The overall losses could be far higher than the estimated £75m, given there are thousands of businesses operating in the industry. 

The ECA and BESA survey shows that contractors of all sizes have been affected by Carillion’s demise:

• The total value of ongoing contracts with Carillion is worth £47.2m, which are now at risk.
• Micro businesses (less than 10 employees) are owed on average £98,000. One of these SMEs is owed more than £250,000.
• Small firms (10-49 employees) are owed £141,000 on average. One of these contractors is owed £800,000.
• Medium-sized businesses (50-249 employees) are owed on average £236,000. One is owed almost £1.4m.
• Large businesses (250 employees+) are owed on average £15.6m. This figure includes Balfour Beatty’s widely reported £45m loss from joint ventures with Carillion.

On Wednesday, BESA and ECA met with liquidator PwC and the government. 

PwC said any private sector work undertaken by Carillion suppliers before 15 January this year would be unpaid. Instead, it would be treated as "unsecured debt", and placed at the back of the queue behind other creditors. 

The ECA and BESA have now called for reform to unfair payment practices in the wake of the Carillion disaster. The company was widely known to take over four months to pay suppliers, despite 30-day payment being industry good practice. 

To tackle this slow payment, the two trade bodies are calling on the government to pay small and medium-sized businesses directly, using project bank accounts. 

Paul Reeve, director of business at the ECA, said: "These findings underline the need for concerted action from the government and banks to protect and support SMEs in the construction and services sector. The government should also introduce legal measures to ensure SMEs are not continually exposed to upstream insolvency."

BESA president Tim Hopkinson said: "We knew the fall-out from this seismic episode would be extremely serious, but these figures give us a clearer picture of just how hard our sector is going to hit in terms of the thousands of pounds of unsecured debt that will be lost by ordinary hard working small businesses, jeopardising their future and the future of their staff."

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