HELP offered by the banks to businesses owed money by Carillion will be no more than a “sticking plaster” solution, industry experts have warned.
UK Business Secretary Greg Clark said ministers were working with banks, trade unions and industry organisations to ensure everything possible was done to provide “continuity” to thousands of small businesses used as sub-contractors by the construction giant.
Banks had agreed to provide support worth almost £250 million to those facing a hit from the failure of the company, which went into liquidation on Monday. But Mike Cherry, policy chairman of the Federation of Small Businesses (FSB), said that support would “probably” not be enough for many businesses and self-employed contractors.
“It is only going to be a sticking plaster to help those who are viable to continue in business and recover in time,” Cherry told BBC Radio 4’s Today programme. “We all need to understand that it is very unlikely, in any administration or liquidation, that those who have already invoiced Carillion up to the announcement on Monday are going to get anything out of this at all.”
Clark said that it was for the Official Receiver to establish what proportion of Carillion’s debts would eventually be paid out to creditors, but executives’ salaries would not be treated as a priority.
Cherry said that Carillion’s collapse had highlighted the problem of late payments, which should be stopped “as a matter of urgency”. The FSB had raised concerns with Carillion last year about its policy of extending payment terms to 120 days, he said. However, sources claim Carillion itself was owed £40m by the UK Government when it went bust.
Meanwhile, the House of Commons Liaison Committee, which consists of all the select committee chairs, has opened an investigation into Carillion.
Labour MP Frank Field, who chairs the work and pensions committee, said: “I will be proposing we take evidence from the company directors, the trustees, the pensions regulator and the auditors who somehow concluded Carillion was a going concern.”
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