ECIC says many customers are at risk of financial difficulties, or even failure, because of the Carillion collapse

ECIC is warning regional brokers that many of their customers could be facing financial difficulties and possibly failure as part of the fall-out from the collapse of construction giant Carillion.

The insurer is supporting the ECA (electrotechnical and engineering services trade body) and BESA (the Building Engineering Services Association) in calls to resolve the construction industry’s retention issues.

According to latest figures, Carillion owed over £800m in debt to sub-contractors. This money is in danger of being lost, leaving many more firms at risk of financial collapse.

Richard Forrest Smith, chief executive of ECIC said: “Many specialist contractors risk losing millions of pounds, putting jobs and companies under threat because of Carillion going into liquidation. We support ECA and BESA’s calls to protect retention money and would urge regional brokers serving this corner of the insurance market to do the same.”

Direct Line has already been identified as one company to be directly affected by the collapse.

Peter Aldous, MP for Waveney and longstanding champion of SMEs in industry, introduced a draft Bill to Parliament just last week, which seeks to amend the 1996 Construction Act to ensure retention money is held in a deposit protection scheme – avoiding just this kind of situation.

ECA and BESA’s proposed five-point action plan:

• Any SME contractors already working on Carillion projects should be allowed to continue on these projects and be paid directly.

• The UK Government must actively support the Peter Aldous Bill on retentions and ensure it is allocated enough Parliamentary time to progress.

• Major public sector suppliers like Carillion should be precluded from winning any further contracts unless it can prove it pays its supply chain promptly.

• Major corporate public sector suppliers like Carillion worthy of their own Government account managers, and who rely on SME supply-chains for successful delivery must be made to implement transparent supply-chain payment systems, statutory public sector payment requirements, Project Bank Accounts and no retentions, throughout the supply chain.

• The government must monitor and enforce the public sector 30-day payment supply chain model as opposed to Carillion’s own 126-day payment terms, which leaves thousands of SMEs struggling for cash flow to pay staff and suppliers.