The Government must learn from Carillion’s demise and assess its over-reliance on major contractors, according to the Federation of Master Builders (FMB).
Commenting on the announcement on Monday, January 15 that Carillion is to enter compulsory liquidation, Brian Berry, chief executive of the FMB, said: “Carillion’s liquidation is terrible news for all those who work for the company and it will have serious knock-on effects for the many smaller firms in its supply chain, some of which will be in serious financial danger as a result of Carillion’s demise.”
Berry concluded: “Carillion’s liquidation raises serious questions for the Government, not least about its over-reliance on major contractors. The Government needs to open up public sector construction contracts to small and micro-firms by breaking larger contracts down into smaller lots. That way, it can spread its risk while also reaping the benefits that come from procuring a greater proportion of its work from a broad range of small companies. Construction SMEs train two-thirds of all apprentices and are a sure-fire way of spreading economic growth more evenly throughout the UK.”
Richard Beresford, chief executive of the National Federation of Builders (NFB), said: “When a major contractor goes into liquidation, it highlights the importance of diversifying those to whom you award contracts. When a company does go into administration, those suppliers owed money in retentions are unlikely to be paid, even though they have already provided skilled services.”
Beresford added: “Many large regional contractors miss out on work simply because they are not among the usual suspects. Let’s not forget that £10.5 billion of the UK construction industry’s annual turnover is withheld in retentions by clients and large contractors from regional SMEs in their supply chain.”
There are two Government consultations on retention payments in construction open until January 19. It is important that everyone with an interest makes their voice heard so the impact of companies going into liquidation can be minimised.
