Carillion subcontractors could get less than 1p for every £1 owed, court documents have revealed.
The figure was quoted in the Evening Standard after it saw a High Court witness statement signed by Carillion’s interim chief executive Keith Cochrane.
“This showed that the insolvency recovery for creditors in the event of a group-wide liquidation would be an average of between 0.8p in the pound and 6.6p in the pound,” the Standards quoted the statement as saying.
Accountancy firm UHY Hacker Young partner Peter Kubik said: “Any company affected by Carillion’s collapse should conduct a health check to make sure they are still a viable going concern.”
He added: “Those construction companies and subcontractors that derived the lion’s share of their income from Carillion are facing some tough months ahead.”
Carillion had just £29M cash when it went into liquidation, the court documents also revealed.
Government help for Carillion subcontractors on private sector jobs could be cut off from today (Wednesday).
Cabinet Office minister David Lidington told parliament on Monday that while the government will continue to pay wages for firms providing public services, companies working on private sector projects would only get financial support for 48 hours.
Lidington said a JobCentre Plus helpline has been set up which is “particularly intended to help” employees of firms who were working with Carillion on private sector contracts. The Official Receiver (a civil servant in the Insolvancy Service) and others are in talks with the roughly 30,000 firms which could be affected by the collapse.
The Federation of Small Businesses (FSB) has advised that small and medium-sized enterprises (SMEs) are fifth in line for Carillion cash after banks, liquidators and Carillion employees have had their share.
Kubik said this could leave firms owed money with as little as £600,000 to share between them. He added UHY Hacker Young had spoken to several creditors owed more than £1M each.
Some suppliers have said Carillion’s collapse will affect them financially. Geotechnical engineering firm Van Elle said it is owed £1.6M for services it carried out for Carillion, while tools and plant hire firm Speedy said its outstanding debt with Carillion reached £2M, which in some cases is shared with joint venture partners.
PwC, which is now running Carillion, said suppliers should continue to turn up to work and will be paid for goods and services supplied during the liquidation period. The firm said a letter will soon be released with further instructions for suppliers.
Business secretary Greg Clark has asked for a fast-tracked investigation into Carillion’s directors following the collapse yesterday, when Carillion folded with £900M in debts and a £600M pension deficit.
Meanwhile Leeds City Council has said it will retender the East Leeds Orbital Route (ELOR) contract for which Carillion had won up to £120M of work just days before it went bust. The council said the final contract had not been awarded and it was reviewing how to continue without Carillion.
In a statement the council confirmed: “The procurement process for ELOR identified Carillion as preferred bidder and we had robust mechanisms to protect us should there be any problems with Carillion, although, as the contract was not awarded, these were not required.”
“The council is now looking at options regarding future procurement strategy for ELOR, which are likely to include using the existing procurement exercise to secure an alternative contractor or re-tendering.”