The UK’s second largest construction company has gone into compulsory liquidation…..

Jan 15, 2018

Yutree’s BIBA scheme provides employers, public and products liability cover to the construction industry. Yutree also has a scheme for contractors all risks and excess of loss cover for the construction sector. Today’s news will have far reaching consequences for those  construction clients involved with Carrillion.

 

Carrillion Plc has gone into compulsory liquidation. Carrillion is a large company involved in a whole host of major government projects including schools, prisons and HS2. Many of these large contracts have proved less lucrative than the firm thought they might and, as contracts underperformed, debts soared. Today’s news suggests that the situation was insurmountable and that a Company Voluntary Arrangement (CVA) or other informal arrangement with creditors was just not possible.

 

As we know from insuring the construction industry, cashflow is king and spiralling costs, late payments and unforeseen delays can tip even the largest of firms into the danger zone. Carrillion seem to have suffered a mixture of these factors resulting in today’s devastating news for employees, sub-contractors, joint contractors and the public services which were reliant on Carrillion’s services. Balfour Beaty have said that they face costs of up to £45m arising from its joint ventures with Carrillion.

 

Construction, trade credit and other infrastructure insurers are facing potential losses following the collapse of Carrillion. Beyond endangering the thousands of jobs at Carrillion, the stability of its suppliers will also be impacted. There will be unpaid invoices liable to cause problems for the months and years to come.

As brokers, you may well be insuring clients who are sub-contractors of Carrillion’s and it is worth thinking about the minefield that they could now be facing. If they are owed money by Carrillion, they will need to apply to the liquidator, once they are appointed, with proof of this debt. A collateral warranty may have been put into placed creating a contractual responsibility which otherwise wouldn’t have existed. You may have been involved in arranging performance bonds for sub-contractors of Carrillion. Leathes Prior, Norwich based specialists in construction litigation, point out that, “If Carrillion were acting as the main contractor, the sub-contractor may have given rights to the employer (e.g. a public sector organisation) that can be enforced upon the insolvency of Carrillion. The liabilities for those could be significant.” Companies with any ongoing disputes with Carrillion should take legal advice.

 

What is clear from today’s news is that it is likely to be a rocky road ahead for anyone involved with Carrillion. It is worth taking stock of which of your customers might have been involved with them, directly or indirectly, and making yourself available for advice and guidance from an insurance perspective. It is possible that this situation might result in more insolvencies as smaller contractors suffer under the weight of what has happened to Carrillion today. Government intervention is not to be ruled out but, as we sit here today, we can only watch and wait.

 

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