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'Catastrophic losses': Carillion retentions crisis looms

Thousands of subcontractors have been left in limbo over retention payments owed by Carillion after the country’s second biggest contractor fell into liquidation on Monday.

Construction News has heard from a number of firms still awaiting retention payments from the collapsed contractor totalling hundreds of thousands of pounds.

One subcontractor, currently working on a problem Carillion PFI project, told Construction News it was awaiting retention payments of around £200,000.

CN has also been made aware of another firm owed more than £150,000 on a long-term housing maintenance deal Carillion signed with a government body.

Building Engineering Services Association president Tim Hopkinson said the liquidation of a contracting giant such as Carillion could lead to “catastrophic losses for thousands of SMEs”.

Specialist Engineering Contractors’ Group chief executive Rudi Klein estimated the amount of money held by Carillion in retentions could be as high as £1bn.

Mr Klein told CN it would not be a matter of if firms will fall into administration following Carillion’s demise, but how many.

He added: “We are currently assessing just how much our members are exposed to this and we are looking to meet with [Cabinet Office minister] David Lidington this week.”

TJ Duncan-Moir, managing director of Nottingham-based specialist A1 Flue Systems, said her firm had been fortunate to avoid significant exposure to Carillion, but said she knew of a number of firms that were waiting on payments.

“At the moment we do have jobs that are on hold until we’ve got any further advice on them,” she said.

“We are owed some retentions by Carillion but not a huge amount in the grand scheme of things.

“I’m sure Carillion will take others with it, that is how these sort of things happen when it is such a huge company like Carillion.

”Retentions is in a mess, we need some sort of guidance, support and structure from the government to avert issues like this.”

Mr Lidington has said the government will not hand over any money to Carillion’s trade creditors.

Other suppliers have revealed their exposure to Carillion’s liquidation, with building services specialist T Clarke revealed in a trading update earlier today that it had exposures of around £100,000 following the contractor’s collapse.

ECA director of business Paul Reeve said: “Carillion’s move into liquidation places their huge supply chain – which includes many electrical and other specialist contractors - at risk of losing millions of pounds, which will threaten companies and jobs.

“While this is a clear and present disaster for construction and wider maintenance, the question will ultimately follow, why did Carillion appear so attractive to clients even as they moved towards collapse?”

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