HUNG OUT TO DRY BY CARILLION FAT CATS

Up to 30,000 small firms may get as little as 1p in the pound from failed construction giant where bosses paid themselves millions

TENS of thousands of small firms may get less than a penny back for each pound they are owed by Carillion.

The collapse of the construction giant leaves up to 30,000 traders facing total losses of hundreds of millions of pounds.

Contractors and suppliers undertake almost £1billion of work for the firm a year. They are now at risk of having to slash staff or going under.

A report by accountants before Carillion went bust showed creditors would get between 0.8p and 6.6p in the pound if it went into liquidation.

It has only £29million in the bank, having paid out £458million in dividends to shareholders between 2011 and 2016. Its directors – past and present – are to be investigated by the Official Receiver.

Many sub-contractors will be owed money going back months, according to Mike Cherry of the Federation of Small Businesses.

He said: ‘It is vital that Carillion’s small business suppliers are paid what they are owed, or some of

those firms could themselves be put in jeopardy, putting even more jobs at risk besides those of Carillion’s employees.’

As the fallout intensified over the largest corporate failure since the financial crash:

Ministers ordered a fast-track investigation into the company’s directors;

They said staff working on public sector contracts would continue to be paid;

State-backed Royal Bank of Scotland was accused of undermining Carillion’s attempts to avoid collapse;

Jeremy Corbyn said the firm’s directors should pay back their bonuses;

It emerged that Carillion went bust carrying up to £3billion of financial liabilities.

Carillion, which was Britain’s second biggest construction firm, went into liquidation on Monday after running up losses on contracts and huge debts. Its business is now in the hands of the Official Receiver, which is reviewing all its contracts.

Yesterday the sites of major multi-million pound developments in Manchester, Birmingham, London and Sunderland were deserted. It appears that work on the Royal Liverpool Hospital could also be delayed.

At Holyrood, Economy Secretary Keith Brown told MSPs the £745million cost of the Aberdeen Western Peripheral Route (AWPR) should not be affected by the demise of Carillion. It formed one-third of the Aberdeen Roads Ltd consortium, alongside Balfour Beatty and Galliford Try.

Mr Brown said: ‘We understand that Balfour Beatty and Galliford Try will now take the necessary steps to jointly deliver the remainder of this project.

‘There is nothing in the nature of the change which has happened that necessitates a delay but we’ll keep our eye on further developments as they take place.’

Mr Brown said the Scottish Government did not expect any further AWPR costs as a result of the liquidation, pointing out the two remaining partners had referred to ‘a hole in the project now of £40-£80 million’.

He added: ‘That’s for them to consider with the banks and lenders that are part of this consortium, it’s not for the Scottish Government to fill that hole. But we will look to see if there are any additional costs.

‘We don’t expect there to be any but we are having dialogue with the companies involved.’

Westminster Business Secretary Greg Clark demanded the probe be broadened and fast-tracked. The conduct of current and former directors will be examined.

It also emerged that taxpayerbacked Royal Bank of Scotland tightened the terms of its funding to Carillion three days before it was forced to call in liquidators.

In a witness statement filed in the High Court, Carillion’s interim chief executive Keith Cochrane accused the lender of taking ‘unilateral action which in the company’s view undermined the group’s efforts to conserve cash’.

On Saturday, it submitted a final plea to ministers for funding, but the next day the request was refused in favour of liquidation.

Mr Cochrane’s statement disclosed that the firm has debts and liabilities of £3billion – including a £587million pension deficit.

Carillion employed 43,000 people worldwide, including almost 20,000 in the UK, and had 450 contracts with the Government. Ministers said staff and contractors working on public sector service contracts would continue to be paid. But there was no such guarantee for firms tied into private work.

The Pension Protection Fund is expected to take on Carillion’s pensions deficit.

The firm spent £952million with small firms in 2016 and ministers said companies working on the firm’s private contracts would be paid for another 48 hours.

But some are already losing out – and laying off staff. Mr Cherry said unpaid bills could go back months, as some suppliers said they waited 120 days to be paid.

‘Sadly, these kind of poor payment practices are all too common among some big corporations,’ he said.

‘When the dust settles on this sorry saga, there is a wider lesson to learn about the concentration of public contracts in the hands of a small number of big businesses.

‘Public procurement must be more small-business friendly, in which it is easier for small firms to navigate the system.

‘The Government should prioritise meeting its target of at least one third of taxpayer-funded contracts going to smaller firms.’

Sarah McCann-Bartlett, of the British Constructional Steelwork Association, said thousands of subcontractors would be out of pocket. ‘There is always a trail of subcontractors that go under in these situations,’ she added.

‘A lot were working for Carillion and were not insured, and so that’s devastating.’

Labour leader Mr Corbyn said: ‘When there are people who are sub-contractors or small firms that are contracted into Carillion that are not getting paid, workers being made redundant at 48 hours’ notice, and less in some cases, the directors, for all the bonuses they have had, should pay them back.’ Comment – Page 16

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