Blue Monday for UK Construction as Carillion enters liquidation

In recent years, the term Black Friday has gathered some following. It was imported from the USA to represent the first day after thanksgiving and a day when traditionally the best deals are available from retailers. Many people are familiar with this term and it has helped UK consumers kick start the Christmas shopping.

Blue Monday is probably less well known in the public’s imagination (other than by fans of 1980s New Order) but is meant to be the glummest day of the year. The term Blue Monday has been defined as the third Monday in January when reality starts to bite for many people, when the excesses of Christmas seem like a long time ago and when the New Year’s resolutions feel too hard and the weather too depressing.

Sadly, today 15 January 2018, is a very depressing day for those in the Construction Services industry as it is the day when the Government has said “enough is enough” and stopped guaranteeing monies owed to the banks by Carillion.

This will lead to an uncertain future for the thousands of workers at Carillion and also for the many hundreds of subcontractor businesses in the construction services supply chain that may be owed money. It is uncertain how much of these debts to many SMEs will be paid and also when.

This will put immense pressure on many small businesses who may not be able to afford the working capital requirements to continue to meet their obligations to staff and suppliers.

For many it couldn’t come at a worse time as subcontractors may have been owed money for work done in November and December.

If any businesses have concerns about working capital they should contact their existing funders and accountants to identify their short term funding requirements, and how they can be satisfied.

Planning your business to be resilient for large financial shocks is often easier said than done – though it does show that all businesses should be careful about over reliance on single contracts/customer, should carefully forecast and project working capital needs and should obtain credit insurance where available.

If there is a ray of sunshine, it will be that many of Carillions contracts with the Government or the public sector will still need to be completed. Some workers somewhere will still need to fulfil these essential services and infrastructure projects. At the time of writing, other competitors of Carillion have seen their share prices rise.

There may also be some longer term benefits for the industry if the likely political fall out highlights issues within the UK construction supply chain and eventually new legislation gives greater protection to those near the bottom of the supply chain who are last to get paid.

We will no doubt learn more over the coming weeks and months but it is likely that the outcome of the liquidation, the political fall out and the real story behind the collapse of Carillion will not be fully known for a long time.