This weekend will mark the 90 day anniversary of the collapse of Carillion and while we have seen some insolvencies the predicted catastrophic wave of insolvencies hasn’t materialised yet. We may have become complacent however as Carillion’s standard 120 day terms mean we are now at the point when companies will truly feel the pain as payments from the failed company will no longer be hitting their bank accounts.
Recently the M&E contractor Vaughan Engineering Ltd entered administration citing a debt of £1.7M owed by Carillion mainly in respect of the Vaux Brewery contract. This was followed by news that Sammon Construction had appointed Grant Thornton to instigate a turnaround plan to cover the shortfall of around €8M caused by the insolvency of Carillion. These are just the big name headlines. Credit Insurance underwriters are aware of many smaller contractors and suppliers struggling to survive and there will be many more besides. Following the millions lost to Carillion these large insolvencies will further starve the industry of cash and more corporate failure in the sector is inevitable.
The domino effect is under way, but while it is relatively easy to identify the weaker creditors of Carillion, who may be at the highest risk, it becomes increasingly difficult to predict those companies who will succumb to the subsequent waves. Credit Insurance provides both protection and information and remains excellent value in a volatile sector.