More needs to be done to end the ‘£14 billion late payment crisis’

In the latest report into the collapse of Carillion, the Work and Pensions and Beis committees called Carillion’s rise and fall “a story of recklessness, hubris and greed”

Responding to the publication of the Business, Energy and Industrial Strategy and Work and Pensions Committees’ full report on Carillion, Federation of Small Businesses (FSB) National Chairman Mike Cherry, said “Today’s report lays bare the contempt with which Carillion treated its small suppliers. Originally an attempt to shore up its balance sheet, the construction giant’s shocking 120 day payment terms have destroyed small firms all over the country. The shockwaves from Carillion’s demise are still being felt.”

“Hundreds of suppliers were left out of pocket for work already completed when Carillion collapsed earlier this year. They’ve given up hope of ever recovering the thousands of pounds that they’re rightfully owed. The committees have rightly identified Carillion’s early payment facility as unusually harsh. Supply chain financing can work. But what Carillion had in place was a cruel facility that put an unacceptable squeeze on the small firms it dealt with. Sadly this kind of behaviour is symptomatic of the pernicious poor payment culture that has gripped corporate Britain.”

“The report is right to describe the Prompt Payment Code, which was signed by Carillion, as ‘wholly ineffective’. Far more needs to be done to end the £14 billion late payment crisis which causes 50,000 business failures a year. That includes preventing late payers from winning public contracts/ Carillion’s collapse also marks a serious failure in oversight from Crown Representatives. We need to see this role urgently reviewed to ensure that the Government’s relationships with suppliers are working.”

“The Committees note the letter that I sent to Carillion last July following the extension of its payment terms to 120 days, urging the firm to reconsider. The warning signs were clearly there all those months ago. Sadly those of us pointing them out weren’t heeded. The Government needs to learn lessons from the sorry Carillion episode. Project Bank Accounts – where money for public projects are held in trusts as opposed to by tier 1 contractors – must become the norm. In instances where these accounts are not used, government should be called before parliament to explain why that’s been the case.”

Rachel Reeves MP, chair of the business (Beis) committee, said “Carillion’s collapse was a disaster for all those who lost their jobs and the small businesses, contractors and suppliers left fighting for survival.”

“The company’s delusional directors drove Carillion off a cliff and then tried to blame everyone but themselves. However, the auditors should also be in the dock for this catastrophic crash. They are guilty of failing to tackle the crisis at Carillion, failing to insist the company paint a true picture of its crippling financial problems.”