Carillion collapse has cost us £880k' says Histon-based Flora-tec
Contractor forced to lay off 10 people
The disastrous collapse of construction giant Carillion with debts of £900million on Monday is already impacting the local economy, with Histon-based Flora-tec forced to lay off 10 staff.
“Carillion owe us the best part of £1million just for November and December,” said Paul Mckeown, operations director at the firm, which turns over £7million a year.
“It couldn’t come at a worse time of year for us because we’re doing a lot of winter gritting. If the collapse had happened in June we would have lost £200,000. Because it’s happened now, it could kill us.”
The impact of the government’s decision not to help firms in the supply chain has already proved devastating. Flora-tec, which employs 100 people around the UK and has 500 clients, operates a corporate horticultural service which included ground maintenance and landscape projects for Carillion.
“We’re in a state of shock to be honest,” said Mr Mckeown, before heading to Barnsley to hand other contract managers their redundancy notices. “We’ve worked with Carillion for 20 years. The first inkling that things were not as they should be was the profit warning last July, but we were continually reassured by Carillion that things were fine, they were restructuring and sorting the problems out.
“We kept a close eye on the situation in the last couple of months and were still told everything would be fine, then last Thursday things got serious but we still did not believe that a company the size of Carillion would go into liquidation.”
Around 30,000 small and medium-sized businesses (SMEs) are believed to be owed £1billion in unpaid contracts but minister for the Cabinet Office, David Lidington, announced: “It is regrettable that Carillion has not been able to find suitable financing options with its lenders but taxpayers cannot be expected to bail out a private sector company.”
But Mr Mckeown said whatever the view on where the buck stops when private firms deliver public sector services and infrastructure, the taxpayer will pay for the debacle.
“The government should step in and allow us to continue trading,” he said. “They will pick up the tab eventually anyway, in terms of lost tax, including £40,000 a month lost PAYE and payments of income support and jobseekers allowance.”
The Cabinet Office’s chief press officer Siobhan Bruce told the Cambridge Independent: “No public services are going to go down. The Insolvency Service is the official receiver, with PwC supporting them as special manager.”
Steven Fifer, at the Insolvency Service, said: “PwC is looking at all contracts. The government is continuing with contracts with Carillion employees to ensure contracts with schools, hospitals and prisons continue.”
Carillion had 450 government contracts for everything from high-speed rai – HS2 – to providing school lunches.
“There are 20,000 jobs at Carillion involved,” said Mr Mckeown, “and 100,000 in the supply chain. The government should step in, honour the debts and arrange loans to allow us to continue trading.”
Federation of Small Businesses (FSB) national chairman Mike Cherry said: “It is vital that Carillion’s small business suppliers are paid what they are owed, or some of those firms could themselves be put in jeopardy, putting even more jobs at risk besides those of Carillion’s own employees.”
“I think we have been duped by the government’s stance on Carillion, and their insistence on continuing to award Carillion contract after contract after three profit warnings,” said Flora-tec’s managing director Andy Bradley. “What was the message there? That Carillion are sound, and good to trade with.
“All I’m trying to do is to raise the profile of SMEs because we’re the ones who are going to take the hit: hundreds, if not thousands, of firms are going to go out of business as a result of this.”