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Carillion: Deal struck to pay 300 rail subbies for Christmas work

Around 300 of Carillion’s smaller rail suppliers are set to be paid for their work over Christmas after a deal was struck between Network Rail and the failed firm’s liquidation managers PwC.

The client confirmed it had come to an agreement with PwC to cover small suppliers’ arrears for work carried out between Christmas and 15 January, the date Carillion fell into liquidation.

The deal will mean that two-thirds of Carillion’s supply chain will be paid for their Christmas work, with each supplier receiving £50,000 on average. Network Rail said payments will start today but will take a few days to be processed.

Funds will go to companies defined as SMEs by the Companies’ Act, which requires that two out of three characteristics are met: a turnover of less than £25m, fewer than 250 employees, and gross assets of less than £12.5m.

Carillion’s rail suppliers had previously been told by PwC that money owed for work before 15 January would not be paid, as revealed by Construction News.

CN understands the agreement followed discussions between Network Rail, the Railway Industry Association and Civil Engineering Contractors Association, in which the two trade bodies lobbied for funds to be released to firms most at risk. 

Christmas is typically one of the busiest periods for rail contractors due to the number of possessions which take place.

Construction News reported this morning that several of Carillion Rail’s subcontractors had stopped work and removed equipment from Network Rail sites.

Van Elle, one of the collapsed firm’s biggest subcontractors, said it had completely demobilised from sites and would not return until it had a “firm contractual arrangement in place”.

Network Rail said only a handful of suppliers had not returned, and the impact on projects had been “negligible”.

Last week Network Rail confirmed it would guarantee pay for all Carillion staff until at least April.

The client has also guaranteed to underwrite all suppliers’ costs for work from 15 January for those that continue to work on rail projects.

Network Rail commercial director Matthew Steele said: “We recognise how challenging this period has been for our small suppliers.

“We hope that this will be some positive news to the hundreds of smaller companies up and down the country who have been worried about the impact on their business.

“These small organisations are a critical part of our supply chain both now and in the future.

“PwC, together with our in-house taskforce and the Carillion teams, are carefully managing this difficult period to keep all our rail projects going, and are working hand-in-glove to find ways to support staff and suppliers alike.”

Readers' comments (5)

  • I am amazed.

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  • surely this is illegal.
    Why does one group of sub contractors/suppliers get prefferential treatment over another.
    Aren't every sub contractor/supplier knocked by Carillion suffering the same pain.

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  • I don’t quite understand how this is taking place
    I have suffered 4 times with failed companies and lost in total 471k
    Whilst I am glad some are getting paid can anyone explain as they are not preferential creditors even though they should be in every instance

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  • i agree it is amazing, but lets cellebrate, the client has recognised it needs these companies and has stuck its neck out and put some money in the kitty. would have all been so much better if clients pay into a project bank acct where suppliers are protected

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  • What happens the the monies that were currently due to be paid to carillion by their clients for invoices already raised and work in hand not yet invoiced. Can the clients withold payment / default on payment make direct payments to suppliers???
    Work in december would not be due for payment at the earliest end of jan

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