The Carillion Collapse

The recent Compulsory Liquidation of Carillion was a complete shock to the UK economic and political system. It has been reported that Carillion’s involvement in low margin fixed price contracts (mainly with the Government), and a resulting inability to remain profitable when problems occurred, was the significant reason behind its failure. The ‘chattering classes’ will inevitably focus on such issues and who is to blame for the current situation, demanding a Public Enquiry etc. and questioning political policies. Meanwhile, PwC will no doubt have their hands full with the financial and legal ramifications of Carillion’s downfall for years to come. However, the most pressing issue at hand is actually how to prevent severe repercussions for Carillion’s partners and subcontractors.

The Specialist Engineering Contractors Group speculated that a significant proportion of the 30,000 SMEs who are creditors of Carillion, could be at risk of insolvency as a result of the current situation. With Speedy Hire and Van Elle immediately reporting huge potential losses following the announcement of the Liquidation, it is clear that many of Marriott & Co’s insolvency and restructuring clients’ will be required to provide advice in order to minimise the negative impact of Carillion’s downfall for the wider economy.

The Carillion task force that the Government has established, chaired by Business Secretary Greg Clark, appears to have started the ball rolling at least in agreeing that Lloyds Bank, HSBC and RBS will provide a £225 million fund to support SMEs affected by Carillion’s insolvency. This should serve to stem the impact of the £1 billion that is owed to small suppliers by Carillion. Informal guides to survival for firms affected are already being published, for example the following:

Carillion Insolvency Advice for Businesses

Such guides are certainly useful. However, as per the last point made, businesses must be prepared to seek professional advice. As such, all of us involved in the world of insolvency need to be prepared for the potential requirement for our advice over the coming months.

As a highly experienced RICS Regulated firm, Marriott & Co. is well placed to assist insolvency practitioners with Red Book valuations and professional, independent sales of businesses and assets. We successfully dealt with the valuation and auction sale of the plant & machinery last year of what was effectively a smaller version of Carillion, a Kent based civil engineering company Livis Limited (In Liquidation). We are pleased to advise that the potential dividend for creditors from asset realisations was certainly maximised as a result of our involvement, with the online auction we ran proving extremely successful and well exceeding the insolvency practitioner’s expectations.

If you or any of your clients have been affected by Carillion’s downfall and think you may require our advice or services, in terms of asset valuations or sales (intangible or tangible), please do not hesitate to contact us on 01252 712083. We would be pleased to provide you with a no obligation proposal for assisting with such matters.

 

By Thomas Allman MRICS

Director of Valuations