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East London Councils may escape Carillion fallout

LONDON COUNCILS appear to have escaped the worst effects of the Carillion collapse, according to research by the BBC.

The BBC has revealed a list of London Councils which have told them that they have no work being carried out by Carillion. Among them are: Tower Hamlets, Newham and Redbridge. That leaves Hackney, Havering and Barking & Dagenham yet to report.

As of yesterday afternoon, says the BBC, Carillion was running library services in Croydon, Ealing and Harrow Councils. All three are said to have put contingency plans in place to deal with the demise of Carillion.

Hounslow also had a contract with Carillion, under which the company managed the Council’s parks, cemeteries and allotments. Hounslow’s Leader, Steve Curran, told the BBC that the Council had arrangements in place for these services to be returned to the Council by April 2018 – or earlier if necessary. The announcement was made on Hounslow’s website on 1st November 2017.

This makes answers to the question of which public bodies knew there were genuine concerns about liquidity before Monday’s announcement even more urgent. If – no disrespect, Hounslow – one West London Council was making plans to deal with a Carillion collapse, why wasn’t the Government equally well prepared?

Matters are different for London’s prisons, however, with Carillion carrying out services in Belmarsh, Coldingley, Downview, Feltham, Highdown, Pentonville, Send, Wandsworth and Wormwood Scrubs – that’s eight out of the 13 prisons in the capital. The Government has promised to ensure that services continue – providing funding if necessary, until alternative arrangements can be put in place.

There have been increasing concerns since the collapse was announced that Carillion could be the “big domino” that sets off a long chain reaction. The company’s debts are estimated to be £1.5 billion – but it is not clear that this figure includes everything owed to small suppliers.

Records show that Carillion spent £952 million in 2016 obtaining goods and services from small suppliers. However, one of its former suppliers has pointed out that this could be an underestimate.

Usually large companies will pay invoices issued by small suppliers within 30 days. However, some months ago Carillion extended this to 120 days – around four months. It is therefore unlikely that any invoices sent to Carillion over the last four months have been paid – and the system means they may not have been recorded as company debt yet.

It gets worse. One small company which used to supply Carillion has claimed that the 120 days only began to be counted from the date when Carillion authorised payment of the invoices – a process which could take up to 18 months after the small supplier issued the invoice.

While the extent of Carillion’s debt to small suppliers may not be clear, what seems all too clear from the outset is that Carillion’s assets will be nowhere near enough to meet them.

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