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Government races to stop effects of Carillion collapse on SMEs

Theresa May

The government has been racing to stop the effects of Carillion’s collapse spreading to small and medium enterprises (SMEs).

Business secretary Greg Clark met with banks to discuss credit lines for small and medium enterprises (SMEs) after the contractor went into liquidation on Monday. Prime minister Theresa May confirmed this during parliamentary questions on the firm’s compulsory liquidation. 

Treasury economic secretary John Glen and small business minister Andrew Griffiths also attended the meeting with representatives from Barclays, HSBC, Lloyds, RBS, Santander, Shawbrook, Aldermore and the British Business Bank. 

Clark said it was important that lenders had advice and support systems in place and that individual cases were dealt with “sympathetically, swiftly and approprately”.

UK Finance managing director Stephen Pegge said banks are putting in place emergency measures such as overdraft extensions, payment holidays and fee waivers “where appropriate”. 

Clark has also held discussions with representatives from construction trade associations and trade unions to “make sure we’re on top of the potential effects on the wider supply chain”, May said.

The Federation of Small Businesses (FSB) has advised that SMEs are fifth in line for Carillion cash after banks, liquidators and employees have had their share. The Civil Engineering Contractors Association (Ceca) said that about 30,000 businesses are owed money for work carried out before Monday’s announcement. 

Work has stopped on private sector Carillion construction sites, the Insolvency Service confirmed. No further details on how or if it will restart have been given.

More than 90% of private sector service customers said they will continue to fund projects and workers will be paid until new suppliers can be found, it said. 

Ceca and Build UK have demanded action to mitigate the effects of Carillion’s failure. The organisations will offer a free jobs exchange to match staff facing redundancy with employment opportunities.

They have also offered to work with the government to identify suppliers offering essential services in need of financial support, and have called for the publication of  contracts which could be transferred to other contractors.

The construction industry representatives have also recommended that the details of Carillon’s creditors are shared confidentially with trade organisations so that appropriate support can be arranged. 

May was quizzed by Labour Party leader Jeremy Corbyn about Carillion’s failure during this week’s prime minister’s questions. The company held many government contracts including work on High Speed 2, .

Corbyn pressed the May on why the government continued to award contracts to “notorious late payers” Carillion after its July profit warning sent shares plunging. He accused the government of trying to keep Carillion afloat or of being “deeply negligent”.

May said: “If it were the case that the government pulled out of contracts whenever a profit warning was issued that would be the best way to ensure that companies failed and jobs were lost.”

She reiterated the promise that an investigation into the business dealings of the company would be fast-tracked and Cabinet Officer minister Oliver Dowden later told the BBC that payments to Carillion directors had stopped since the liquidation announcement. May distanced the government from taking responsibility for the collapse saying, “The government is not running Carillion, it is a customer of Carillion”. 

The services and construction company announced it was in liquidation on Monday morning after weekend talks with lenders broke down. The public administration and constitutional affairs select committee will launch an inquiry into how the government and public sector manages the risks of outsourcing the delivery of public services.

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