Carillion Shock Waves Will Reach Far and Wide

19 Jan 2018

Published in: Member News

Crowe Rob Gunn 1The shock waves from the Carillion collapse will be felt across the Midlands for some time, according to national audit, tax and advisory firm Crowe Clark Whitehill.

Rob Gunn, tax partner in the firm's Midlands office, said: "The impact is already being felt by the upstream supply chain with a possible domino effect. Small and Medium-sized Enterprises (SMEs) who are owed lots of money by what was a "secure' plc could now be in difficulties themselves."

The collapse of Carillion caused by a large debt pile, unprofitable contracts and unpaid debts in the Middle East highlights the risks construction companies face in a competitive environment.

Rob Gunn said: "This can be exacerbated by the public sector forcing prices for construction contracts down so margins are low. The repercussions are being felt now and will be felt for some time."

There is concern for the approximate 20,000 employees in the UK along with the wider question of whether it will be the government or another provider picking up some of the loss making contracts.

Rob Gunn added: "The concern over the disruption to its government contracts managing schools and hospitals, as well as supplying Network Rail and being involved in HS2, cannot be understated."

He urged companies chasing monies owed by Carillion to take early advice on the best means of recovering these funds.

The collapse of Carillion also reaffirms statistics from Crowe's 2017 Property and Construction report which found that 27% of the property and construction respondents to the survey were most concerned about the UK economy which is leading to over-competitive pricing on contracts.

Furthermore, 10% of respondents felt a lack of skilled workers leading to higher wages and cost over-runs.

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