More construction firms are entering insolvency since Carillion's collapse

Callum Keown
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British Construction Company Carillion Goes Into Compulsory Liquidation
A total of 780 construction firms have entered insolvency in the first quarter of the year (Source: Getty)

The number of construction firms entering insolvency has jumped six per cent following the collapse of Carillion.

The construction giant's liquidation caused knock-on effects for the whole industry supply chain in the UK, top 10 accountancy firm Moore Stephens said.

Read more: Carillion redundancy payouts to hit £65m

Figures from the government's insolvency services showed that 2,764 construction firms fell into insolvency in 2017/18 – a six per cent increase on the previous year.

After Carillion's collapse in January, 780 construction firms entered insolvency in the first quarter of the year, up 20 per cent on the fourth quarter of 2017.

Thousands of subcontractors lost work and were left with significant debt when the multinational outsourcing provider – that held contracts for hospitals, schools and road projects across the UK – went into compulsory liquidation.

Lee Causer, partner at Moore Stephens, said: “The collapse of Carillion sent shockwaves through the construction sector, and we are seeing more insolvencies as a direct result.

“Large construction companies are infamous for squeezing the profit margins of the contractors and subcontractors who work for them.”

Read more: Hedge funds circle Kier as construction giant "under shadow of Carillion"

He added: “SMEs and specialist subcontractors have been hit particularly hard by Carillion’s fall, as many of them will have relied on the giant for significant amounts of their work.

“It is also likely that these subcontractors would have had to write off virtually everything owed to them by Carillion.”

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