Carillion drags the little guys down with it

• Demise of the 200-year-old British services group jeopardises future of thousands of small contractors

The collapse of British services group Carillion started to hurt thousands of small contractors on Tuesday, with some laying off workers after the rapid demise of a company that was winning state contracts as recently as November.

Rudi Klein, head of Britain’s Specialist Engineering Contractors’ Group, estimated that Carillion had left a trail of £1.2bn in unpaid bills to thousands of small subcontractors.

The 200-year-old company, swamped by debt and pension liabilities, and losing cash, went into liquidation on Monday, threatening suppliers, merchants and big banks.

The government was forced to guarantee the provision of public services, from school meals to road projects.

Private companies that could be hit included a small Northern Irish engineering contractor owed £150,000 and a concrete frame maker in northwest England owed £2m, Klein said.

Flora-tec, a corporate horticulture company based in Cambridgeshire, said it was owed more than £800,000 for its work on Carillion contracts at prisons, schools and hospitals. “Last month, when we were knee-deep in snow, my guys were out at three in the morning putting salt down to make sure [facilities] were safe for people to use. We’re not going to get paid for that,” MD Andy Bradley told BBC radio.

Britain began outsourcing public services in the late 1980s under Margaret Thatcher and the model expanded under Labour’s Tony Blair and Gordon Brown. It is now the world’s second-largest outsourcing market behind the US.

Bradley said the government had encouraged small firms to get involved in public sector contracts “to make sure the little guy got a slice of the pie”.

Spun out of Tarmac nearly 20 years ago and incorporating construction names such as Wimpey and Alfred McAlpine, Carillion operated in Britain, Ireland, Canada, the Middle East and North Africa. It was working on 450 British government projects including the building and maintenance of hospitals, schools, defence sites and a high-speed rail line.

The government said it would pay the salaries of the company’s public sector workers, but private sector contracts would only be paid for 48 hours after the collapse.

The government has faced questions as to why it continued to award Carillion contracts after it signalled it was in financial difficulty in July 2017.

Just a week after that first warning, Carillion was named as one of the contractors on Britain’s new High Speed 2 rail line, a flagship project that will better connect London with the north of England. In November, it won a further two contracts with state-owned Network Rail.

Mike Cherry, chairman of the Federation of Small Businesses, said it was vital Carillion’s small business suppliers were paid or some of those firms could themselves be in jeopardy, putting even more jobs at risk.

He said: “When the dust settles on this sorry saga, there is also a wider lesson to learn about the concentration of public contracts in the hands of a small number of very big businesses.”

For others, the concerns are more immediate. Flora-tec, for instance, said it had already had to lay off people.

THERE IS A LESSON TO LEARN ABOUT THE CONCENTRATION OF PUBLIC CONTRACTS IN THE HANDS OF VERY BIG BUSINESSES