The demise of construction group Carillion has been blamed for a 20 per cent spike in the number of UK building firms becoming insolvent. A new report suggests the as many as 780 firms in the construction sector went bust in the first quarter of this year. The number increased insolvencies in the building industry by a fifth. What are you doing to futureproof your building or cladding business?
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The Carillion effect
There were a total of 2,764 insolvencies involving building firms in the last financial year. According to analysis by accountancy firm Moore Stephens, that figure represented a 6 per cent rise on the previous 12 months.
Carillion filed for bankruptcy in January after its stock market value slumped 90 per cent. It followed the revelation that it news it accumulated debts of around £1bn. At the same time, it was trying to plug a £600m gap in its pension fund. Carillion employed 19,000 people, many working on government contracts.
The impact of Carillion’s collapse
Following Carillion’s liquidation, thousands of subcontractors lost major contracts. They were left with massive debts, Moore Stephens has pointed out. Ministers were accused of realising too late that the company was in financial difficulties and then making matters worse by offering fresh contracts in an attempt to bolster investor confidence.
“The collapse of Carillion sent shockwaves through the construction sector, and we are seeing more insolvencies as a direct result,” said Lee Causer, spokesman for Moore Stephens. “Large construction companies are infamous for squeezing the profit margins of the contractors and subcontractors who work for them. These contractors often cannot negotiate against the terms set for them by their larger clients.”
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