Carillion collapse: Company’s suppliers to get less than 1p for every pound they are owed

Trade creditors set to receive just £600,000 from around £100m owed to them, top accountants say

Ben Chapman
Tuesday 16 January 2018 13:12 GMT
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What is the Carillion fiasco? Economics Editor Ben Chu explains

Many of Carillion’s suppliers face becoming insolvent because they will receive less than 1p for every pound they are owed by the company, a top accountant has said.

Any company affected by the construction giant’s collapse should check its finances to make sure its business will remain solvent if it does not receive payment for work it has done for Carillion, said Peter Kubik, a partner at UHY Hacker Young.

“There will be a huge knock-on effect amongst smaller firms, especially as many creditors can expect to receive less than 1p for every £1 they are owed by Carillion,” Mr Kubik said.

Under insolvency law, just £600,000 is set to be paid to trade creditors as part of the liquidation, according to Mr Kubik – an amount that will be spread “extremely thinly” among a group that is owed more than £100m.

By contrast, the secured creditors, which are mostly big banks, are owed close to £900m and will get “first bite of the company’s remaining assets as it gets liquidated”.

Mr Kubik added: “Those construction companies and sub-contractors that derived the lion’s share of their income from Carillion are facing some tough months ahead.

“Many of these firms may not have trade insurance either as this would have been difficult for them to obtain amid a flurry of recent profit warnings from Carillion.

“We are already in conversation with several creditors who are owed in excess of £1m each and suggest anyone in a similar position seeks professional advice.”

The latest news comes as Carillion’s bosses face an investigation into a “shameful” bid to protect their bonuses before the firm went bust, with the company’s collapse now threatening to turn into a major corporate scandal.

The Government warned directors of the firm, which handled hundreds of public contracts, that they would be hit with “severe penalties” if found guilty of misconduct in securing some £4m in handouts last year.

The bonuses were branded “exorbitant” in the Commons – one former cabinet minister likened the situation to a “British Enron” – while Labour leader Jeremy Corbyn said the collapse is a “watershed moment” for privatisation.

Carillion plunged into compulsory liquidation on Monday, with £900m in debt and a £587m pension deficit, after failing to agree terms with its lenders.

Responding to Mr Kubik’s claims, a spokesman for Theresa May on Tuesday said that the process of payout is done independently of the Government.

“The Prime Minister has obviously been clear that it’s regrettable that Carillion could not find a way to continue,” the spokesman added.

“We’ve said that we are putting in support where ever possible for employees of private firms who are likely to be affected by the collapse of Carillon.”

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