Companies must be paid for Carillion work, debtor firms tell MPs

Construction firms affected by the collapse of construction giant Carillion took their case to Parliament this week at a meeting hosted by Bury North MP, James Frith. Andy Walker reports.

Andy Walker
28 March 2018

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Carillion collapse

Following the collapse of Carillion and seeing firms in his constituency affected by the construction giant’s demise, Bury North MP James Frith tabled an early day motion in Parliament calling on the government to honour all outstanding payments on public contracts for work completed and to enforce public sector 30-day payment regulations. 

Frith’s EDM encapsulated a view that many within the industry agree with - namely that tighter controls and consequences for those who fail to pay monies due is the way forward. The MP followed up his EDM by hosting a meeting in Parliament this week, attended by firms affected by Carillion’s collapse, senior civil servants and government and shadow ministers.

The scale of the losses suffered by contractors and sub-contractors of Carillion was laid bare at the meeting. Firms represented highlighted debts of between £250,000 and £2.7m that still remain unpaid. They expressed their clear frustration that despite doing the right thing and paying their supply chain, they were being left high and dry and told to take their chances with the liquidators to try and recoup the monies they are owed.

Those liquidators have yet to pay up on any of the amounts due and yet the firms left in the lurch by Carillion were being expected to finish their work on projects like the Royal Liverpool Hospital (pictured above) and the Midland Metropolitan Hospital in Birmingham, with little or no prospect of being paid for work already done on those projects. “We want to complete the work but we can’t just go back without any prospect of being paid for what we have already done on these jobs,” said one.

Construction firms at the meeting voiced their frustration at the delaying tactics employed by Carillion in not paying invoices, delays they can ill afford in an industry already existing on wafer-thin profit margins. “The knock-on effect of the debt we face will have an effect on our ability to do other work and what we charge for that work,” said another frustrated sub-contractor who spoke at the meeting.

Also present at the meeting were procurement minister Oliver Dowden MP and the shadow minister for trade and industry Rebecca Long-Bailey. Dowden said he sympathised with the plight of the firms around the table but could give no assurances on whether firms would be paid for the work they had already done, other than saying that they should contact the Official Receiver. 

Dowden said that the government was looking at how the Prompt Payment Code might be beefed up and better enforced to minimise delays to firms being paid. He also indicated that his department was looking at whether project bank accounts – put forward by a number of firms represented at the meeting as a possible solution –  offered a way forward. Dowden said that he was sceptical that project bank accounts would solve the industry’s problems in this area and that more work needed to be done to look into them.

Shadow minister for trade and industry Rebecca Long-Bailey, who in a previous life worked as a commercial property lawyer, said that there were three issues that needed to be addressed. Firstly, prompt payment and a strict enforcement of a 30-day payment code. She said that Labour would enshrine this in law across business, not just construction. 

Secondly, she said that project bank accounts were worth considering and that Labour would mandate them on certain public sector projects. Thirdly, she said that robust measures needed to be put in place in case a collapse like Carillion happened again to ensure that firms weren’t left high and dry. Long-Bailey said that Labour would ensure that a government delivery vehicle stepped in to pick up the reins and deliver projects left unfinished and pay firms left unpaid.

  Bury North MP, James Frith.

There was a real degree of frustration expressed around the table that firms were being unfairly penalised as a result of doing work in good faith for Carillion and that this couldn’t be right. James Frith MP (pictured above) said he shared their pain and would do all he could to highlight their concerns to government and the shadow cabinet. “We have firms here with many years of history who provide good work to hundreds of people who are being placed at risk through no fault of their own and that simply cannot be just,” said Frith.

All the companies at the meeting agreed that there needed to be radical reform of the construction industry and the way that it operates. “We cannot continue in the way that we are where firms are either paid late, not paid at all or have monies retained at the end of contracts,” said one. More transparency in the awarding of contracts was also called for, including opening firms’ books so that it was clear what was being paid and what for. “This is public money we are talking about on large-scale projects like hospitals and taxpayers should know what is going on,” said one sub-contractor.

The politicians and civil servants at the meeting undoubtedly had their eyes opened after hearing the experiences of businesses directly affected by Carillion’s demise. As a small business owner himself, Frith empathised with their position. “We cannot have a situation where firms doing vital work in good faith are left out of pocket because of the vagaries of the market or commercial mismanagement,” he said. 

“Especially on public sector projects, the role of government should be to ensure that businesses are properly rewarded and in a timely fashion, or we could well discover that these firms are unwilling or unable to build the vital facilities that the nation needs. The current system is broken and we need to fix it fast,” said Frith.