ECIC Warning on Carillion Debts to Smaller Suppliers

ECIC, the specialist insurer for the mid-size construction and associated trades is warning regional brokers that many of their customers could be facing financial difficulties and possibly failure as part of the fall-out from the collapse of construction giant Carillion.

ECIC is supporting calls from the ECA (the electrotechnical and engineering services trade body) and the Building Engineering Services Association (BESA) to resolve the construction industry’s retention issues. According to its latest set of accounts, Carillion was holding over £800m in debt payments owed to sub-contractors. There is growing alarm that much of this money will be lost leaving many more firms at risk of financial collapse.

Richard Forrest Smith, CEO of ECIC said;  “Many specialist contractors risk losing millions of pounds, putting jobs and companies under threat as a result of Carillion going into liquidation. We support ECA and BESA’s calls to protect retention money and would urge regional brokers serving this corner of the insurance market to do the same.”

Peter Aldous, MP for Waveney and longstanding champion of SMEs in industry, introduced a draft Bill to Parliament just last week, which seeks to amend the 1996 Construction Act to ensure retention money is held in a deposit protection scheme – avoiding just this kind of situation.

ECA and BESA are calling for the following five-point action plan:
Any SME contractors already working on Carillion projects should be allowed to continue on these projects and be paid directly.
The UK Government must actively support the Peter Aldous Bill on retentions and ensure it is allocated enough Parliamentary time to progress.
Major public sector suppliers like Carillion should be precluded from winning any further contracts unless it can prove it pays its supply chain promptly.
Major corporate public sector suppliers like Carillion worthy of their own Government account managers, and who rely on SME supply-chains for successful delivery must be made to implement transparent supply-chain payment systems, statutory public sector payment requirements, Project Bank Accounts and no retentions, throughout the supply chain.

Government must monitor and enforce the public sector 30 day payment supply chain model as opposed to Carillion’s own 126-day payment terms, which leaves thousands of SMEs struggling for cash flow to pay staff and suppliers.

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