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Carillion Set to Cost Taxpayers, Firms Can Avoid Repeating Mistakes

Top government officials had access to crucial information about Carillion’s financial health four months before the company collapsed, a new report has revealed, as it emerged that its liquidation will cost the taxpayer at least £148m.

The collapse of Carillion back in January devastated construction companies all the way down the supply chain. The debt pile that was left behind is still destroying the cash flow of much of the businesses within the sector. The government has attempted many initiatives to ease the financial burden, but recent reports have revealed exactly how much the collapse is going to cost the taxpayer.

An investigation by the National Audit Office (NAO) has been launched into the Government’s handling of Carillion’s troubles in the months leading up to its insolvency. The spending watchdog has criticised the government for not monitoring the construction giant sufficiently, leading to the build-up of £1.5 billion worth of debt. Other accusations of “hoodwinking” company accounts have been directed at government officials, with Carillion bosses allegedly more interested at hiding financial distress than dealing with the problem.

The NAO has reported that the taxpayer will be forced to recoup the losses from Carillion’s contracts, amounting to £148 million. That bill is expected to rise as the liquidation process continues.

The collapse of Carillion should act as a strict lesson to all business owners, shining a light on how business owners handle their own finances. If low profits or high costs are damaging cash flow, business owners should scrutinise their credit control procedures, ensuring a build-up of late payment and residual debt is not causing irreparable damage. Approaching a third-party company like here at the Credit Protection Association is a strong alternative to occupying all time chasing invoices in-house.

Frank Field, the Labour MP who leads a House of Commons committee that has issued a report on Carillion and the failings of its directors, said that the NAO report showed how the Cabinet Office had fallen short.

The report says that the Cabinet Office employed no direct overseer of Carillion in the three months after the profit warning after the departure from the civil service of the “crown representative” that each major contractor is assigned by the government.

Despite the evidence that Carillion was in a crisis from which it might not recover the company was not assigned to the Cabinet Office’s “high risk” red alert until September and contingency plans for Carillion’s failure were not stepped up until October. Even when the company went into liquidation in January, the Cabinet Office still did not have a complete list of the government’s exposure to Carillion and did not have contingency planning in place.

A spokesman for the Cabinet Office said: “Throughout this process, the government has been clear that its priority is to ensure that public services continue to run smoothly and safely. The plans we put in place have ensured this, and we continue to work hard to minimise the impacts of the insolvency, having safeguarded over 11,700 jobs to date.”

Frank Field, the Labour MP who leads a House of Commons committee said: “Carillion hoodwinked the government as they did many others who were so naive as to trust their published accounts,” he said. “At the earlier stages government oversight was inadequate. The government has to up its game.”

The collapse of the Carillion sent ripples across the whole business community, damaging companies with the even the slightest connection to the construction giant. The crisis highlighted the vulnerability of the supply chain and how important it is for business owners to strengthen their finances, not only for their own sake but for everyone who will be hurt by even the smallest crack in their financial armour.

One of the major factors involved in the construction giant’s demise is the combined complete lack of foresight. Government officials refused to admit the terrifying state of Carillion’s financial future and left its suppliers to pick up the pieces when its luck ran out.

At the Credit Protection Association, our debt recovery services chase down unpaid invoices to recover extra cash where long periods of low profits have severely damaged finances. We complement this with our credit management products, where thorough credit checks and status reports ensure all suppliers and customers pay on time and single out tjhose companies with any history of late payment.

Here at CPA, we fight to the tooth for our members, particularly those who have suffered through late payment and bad payment practices. Furthermore, we recently created a new department within our company dedicated to getting our members rightly compensated in accordance with the Late Payment of Commerical Debts (Interest) Act 1998. This has unlocked hidden cash and potential for our members and brightened their prospects and longevity on the high street.