I beg to move,
That leave be given to bring in a Bill to require public authorities to pay certain suppliers using project bank accounts; and for connected purposes.
It is exactly a year ago today since the construction giant Carillion announced it was going into liquidation. At the time, there was widespread concern about what that would mean for the completion of major public sector projects already under way, including hospitals and HS2, which Carillion was also working on as part of a consortium. There were also real worries for the 30,000 or so small businesses that, as part of Carillion’s supply chain, were also working on these projects. After Carillion’s collapse, thousands of those subcontractors lost major contracts and were left reeling with substantial debts. A survey of building, engineering and electrical firms showed that small businesses were, on average, owed £141,000 by Carillion, out of a total of £2 billion owed to suppliers. The vast majority of those suppliers never received any recompense. Following on from those losses, it has been estimated that 780 small building firms went into insolvency in the first quarter of 2018 as a direct consequence of Carillion’s collapse—that is a 20% increase in insolvencies on the previous year.
Neil Skinner, whose construction firm Johnson Bros. is based in my constituency, and who is here today, was one of Carillion’s suppliers and lost £176,000. Neil told me:
“Carillion often went over sixty days”
before it paid him,
“with a lot of chasing, and once the job for a particular customer was finished our sanction, to stop working, was gone and their payments just stopped”,
even though Carillion still owed money for the job that Johnson Bros. had done for it.
“They resorted to using all the familiar late payment tactics, from finding fault with an invoice, referring us to their India accounts office, statement queries, disputed invoices paid, and so on.
Then, lastly, they imposed a 15% non-negotiable discount on our work or they would send all unpaid invoices back to their quantity surveyor’s (QS) department. We reluctantly signed this contract and then they went ‘bump’ the Monday after signing and 10 days before the first part payment was due.
As a result of Carillion’s late payment tactics small enterprises like mine have been suffering greatly, if not terminally.”
Neil added:
“Large companies know late payment can destroy small businesses like us, but they rely on these tactics to ‘cook the books’ and be seen to be profitable themselves. Carillion went under owing us well over 15% of our annual turnover and, following a difficult year last year, this money is much needed to help us survive.”