The collapse of Carillion could provoke a serious crisis

The collapse of Carillion is a disaster for small businesses. Many now face missing out on unpaid fees which may well go back several months along with a damaging loss of business.

It shows poor judgement by the Tories that despite three profit warnings in the last six months they went ahead and awarded Carillion public sector contracts worth up to £2 billion pounds.

Prior to its collapse, Carillion was forcing small businesses to wait up to 120 days for payment, which is well above the 30 days period recommended by the Prompt Payment Code. By paying suppliers so late Carillion effectively used small businesses to stay afloat.

The Government failed to take any action, despite the Federation of Small Businesses writing to them in July 2017 urging them to ensure that Carillion observes the 30 day payment period to avoid putting suppliers at risk.

Labour’s manifesto pledged to ensure that any company procuring government services complies with a range of standards, including full and prompt payment of suppliers within 30 days and full trade union recognition.

The Government must act quickly to bring these public sector contracts back in-house to protect public services and ensure employees, supply chain companies, taxpayers and pension fund members are protected.