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Blog Post By Genevieve Lewis

How will the Carillion collapse affect industry?

The fallout from the Carillion collapse is a news topic that Britain will monitor very carefully, as some media outlets have even speculated that the economy could be in trouble.

As many of the subcontractors find themselves panicking about the consequences, the British government has already assured public sector companies that they will cover the cost of what they are owed, but any private subcontractors that were employed by Carillion will suffer, as support only lasted 48 hours. It has even been reported that some of these firms have had to make staff redundant following the collapse of the construction giant.

The government also faces a barrage of criticism for awarding the company such major contracts when it was struggling, although talks were held to try and prevent the collapse. Carillion was given a clean bill of health by auditors KPMG in only March last year, and was posting positive profits until mid-last year as share prices plummeted. In December, a formal request for financial support was submitted, just weeks before it went bust.

So, how will this affect the sign and print industries? It is predicted there are up to 30,000 subcontractors that worked for Carillion, and these will have included print and sign outfits. The government has argued that it will maintain current projects in the public sector and pay for them, but many of the workers do not know where they stand on topics such as pensions.

Carillion going into liquidation rather than administration will impact on sign companies owed money for signs already supplied and not paid for, of course, but for future projects there will be other construction companies who can pick up the project

Unite national officer for the print industry, Louisa Bull, comments: “There is clearly an impact on the supply chain in print.” However, the trade union has made it clear that no print company in the Unite umbrella has suffered a hit. Bull continues: “To date none of our companies have been affected, nor do we have any immediate concerns that they will be. However, because of the large-scale nature of the Carillion debacle, it is a situation we will be keeping a close eye on in the weeks ahead.”

It has been argued that three projects, the £490m Royal Liverpool Hospital, the £430m Midland Metropolitan Hospital, and the £745m Aberdeen bypass were the biggest contributors to Carillion’s downfall. Despite the fear surrounding the company going bankrupt, British Sign and Graphics Association director, David Catanach, believes that the fallout for sign subcontractors is not all negative.Catanach explains: “Carillion going into liquidation rather than administration will impact on sign companies owed money for signs already supplied and not paid for, of course, but for future projects there will be other construction companies who can pick up the project—and later on tender for signs required at the end of the project.

“More immediate projects due to be finished will be delayed until another company can take over the completion of construction and re-order any necessary signs later on,” continues Catanach, adding: “We are not aware as to the number of projects in any of these three possibilities, so it is impossible to asses any effect to the sign industry this has. Those sign companies who had Carillion as their major customer though, will of course, need to find work to fill that gap.”

Since Carillion has gone into liquidation, a taskforce has been set up to cushion the fall for small businesses that were subcontracted by the company. Lloyds Bank has also set up a £50m fund to prevent SMEs from also suffering.

On Monday January 15th 2018, workers on the Midland Metropolitan Hospital were locked out of the site, the first sign that the company had gone bust

The liquidation is being led by accountancy firm PwC, which posted a statement on its website on Monday January 15th when it was announced Carillion had collapsed. The statement reads: “On Monday 15 January 2018, the High Court appointed the Official Receiver as liquidator of the above Companies on the petition of the Companies’ directors and simultaneously the Court also appointed Michael John Andrew Jervis, David James Kelly, David Christian Chubb, Peter Dickens, David Matthew Hammond and Russell Downs of PwC, as special managers to support him.”

PwC also made it clear, that unless subcontractors were specifically told not to come to work, work should carry on as normal. The statement continues: “The Official Receiver’s priority is to ensure the continuity of public services while securing the best outcome for creditors. Unless told otherwise, all employees, agents, and subcontractors are being asked to continue to work as normal and they will be paid for the work they do during the liquidations.”

Carillion’s collapse is undoubtedly a worrying event, as just a couple of days later, as it was announced another major UK support company, Interserve, was being monitored by government officials as its share prices slumped. The company employs 80,000 people worldwide, and provides services to the government in maintenance, cleaning, healthcare, and construction, and submitted a profit warning in September last year.

It is a mixed response, with some positive that the work will be picked up by another contractor, but for those small companies that have had to make staff members redundant, it must feel like the world has started to fall apart around them. Only time will tell of the true effects following the crash, while those sign and print companies subcontracted by Carillion await their fate.

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