We start the series with Carillion, exploring what led to the company’s fall from grace and what lessons can be learnt when it comes to protecting smaller scale businesses in to the future.
The demise of Carillion has had a wide ranging impact on thousands of people comprised of previous employees who now face redundancy, but also many small and medium sized businesses in the UK who are owed late payments from the company. Carillion’s fall saw a flurry of industry figures reiterating the need for more robust protections. Britain’s’ Federation of Small Businesses has long fought for better use of the Protection Payment Code, and the Carillion case has only added fuel to their fire.
In the words of John Gildersleeve, chairman of property developers British Land and deputy chairman of telecoms company Talk Talk, late payments is a problem that has “infected British business forever”.
In the wake of Carillion’s collapse, it was discovered that the group had been paying subcontractors with a 120 day wait, and these delayed payments forced many smaller size companies to turn to bank financing at high costs, simply to remain in business. Others were, more seriously, forced to close down completely.
The UK business secretary Greg Clark appeared in front of an MP-led inquiry in to the collapse of the contractor in February. He attempted to reassure the business community that the UK government is planning to make “urgent” updates and changes to its procurement policies, however political progress and policy change can be slow. That’s why invoice insurance is increasingly in the limelight as an easy, practical way for businesses to protect themselves from protracted default and client insolvency.
It was during this inquiry that the ineffectiveness of the current Prompt Payment Code was brought to light, as Carillion had in fact subscribed to the code but still had payment terms of 120 days. The business secretary admitted that this was too long. It’s clear that more needs to be done on the side of the government but Clark evaded giving businesses a precise time frame, saying “I don’t have a specific timetable but you have my assurance that this is a priority and it needs to be urgent”.
What, therefore, can small and medium enterprises do in the meanwhile?
It also helps to make informed and confident choices for a bright future, safeguarding your company with tailored client insights from our credit specialist team. With a wave of high profile folds having a domino effect on those lower down the food chain, it’s high time that dynamic businesses begin to adapt and invest in invoice insurance cover.
We’d be delighted if you get an invoice insurance quote for by clicking the link below – it’s a simple process and won’t take long.