Carillion

In a positive statement for FM contractors (including many schools and hospitals), over 90% of Carillion FM public and private sectors contract clients want PwC to roll over contracts.

• Government has facilitated an improved dialogue for industry with PwC over plant, materials and future contracts
• The Secretary of State for Business has spoken to HMRC and encouraged the Time to Pay initiative to specifically support SMEs in managing the impact of Carillion on their ability to comply with their tax obligations.
• Government is listening closely to reports of lenders not taking an accommodating approach during the wake of the Carillion collapse

BESA:

• offered to assist Government due to the very poor visibility of the Carillion supply chain.
• offered to feed into the combined questions to PwC around the risks attached to the liquidation process
• called for the sector deal to combine construction and FM into a comprehensive whole-life proposition
• welcomed the prospect that the Small Business Commissioner could maintain a dialogue with the industry liaison group
• will support Government in considering greater Government oversight of large public sector suppliers to prevent this scale of collapse happening again

Progressive main contractors have issued statements in relation to their joint venture projects with Carillion:

• Balfour Beatty statement

• Kier statement

Further, the PWC website now has construction specific FAQs on it.  BCSA is reviewing these FAQs and will query government if they are not clear or incomplete:

Major banks have committed to making specialist arrangements to cater for creditors of Carillion or those caught up in the Carillion supply chain. This will be made clear in communications on each bank’s website, outline details below:

HSBC LAUNCHES £100M EMERGENCY FUND FOR SMALL BUSINESS SUPPLIERS OF CARILLION:

• New fund will help ease the impact of Carillion’s liquidation on small firms
• The fund will help customers with fees and repayment holidays
• Firms identified as part of Carillion’s supply chain are being contacted by HSBC specialists
• All lending decisions taken on a case-by-case basis, so the impact of recent events can be taken fully into consideration
• HSBC has set up a dedicated helpline for customers to call – 0800 0121 614

The fund opens today and will be used to help waive fees on financing facilities as well as to offer short-term capital repayment holidays for the worst affected firms.

In addition, HSBC UK is contacting companies who may need help, to discuss how we can best support them. HSBC UK business customers who want to contact us should speak to their Relationship Manager or call us on our dedicated Carillion helpline, 0800 0121 614.

Lloyds Banking Group announces £50m emergency fund for small businesses in Carillion's supply chain

• The fund will provide a range of support for customers, including waiving upfront arrangement fees on overdrafts and invoice finance facilities to existing customers; and offering capital repayment holidays on existing loans for the most severely impacted customers

• The fund will be open from today and existing small business customers can apply through their usual relationship contacts, who are on hand to support businesses in need of assistance.

• The fund is designed to support the working capital needs of small businesses within Carillion’s supply chain that may now be experiencing financial difficulty. It will provide them, subject to credit approval, with arrangement fee-free overdrafts and, for the most severely impacted customers, with capital repayment holidays on loans for an initial six month period, to help with cashflow shortages caused by the liquidation.

Customers will also be able use the fund to extend or draw new invoice discounting or factoring products, free of arrangement fees.

The Group’s support will also include guidance on working capital requirements to help firms unlock cash so they can manage their way through the difficulties they currently face.

RBS has a proactive approach that allows it to assist its customers when there are unexpected external circumstances. This support is available to customers banking with NatWest, Royal Bank of Scotland and Ulster Bank in Northern Ireland.

The bank has already started proactively contacting business customers who supported Carillion. Other impacted customers are encouraged to get in touch to understand the unique support and guidance that can be offered to their business.

This can include:

• Loan repayment holidays
• Interest rate reductions
• Temporary emergency loans with no fees
• Overdraft facilities
• Working capital support
• Helping with financing strategies via access to specialist bank staff

Impacted customers can contact their normal business contact at the bank or telephone:

Royal Bank of Scotland customers - 0345 600 2230 (Minicom 0800 404 6160).
NatWest customers – 03457 11 4477 (Minicom 0800 404 6161)
Ulster Bank Northern Ireland customers - 1850 211 690 if calling from within Ireland and 0044 2890 538 459 if calling from outside Ireland.

On 17th January, BESA met with the Government and PWC - below is a summary of information that will be relevant to the running of your business:

Special arrangements:

• Major banks have committed to making specialist arrangements to cater for creditors of Carillion or those caught up in the Carillion supply chain. This will be made clear in communications on each bank’s website.
• An indication that HMRC will offer flexibility with those struggling to pay tax bills – more details on this to follow.

PWC’s involvement:

• Under the compulsory liquidation legal process, PWC will seek to maximise the recovery of funds in administering the liquidation process.
• Unlike a conventional liquidation process, PWC are continuing to trade, operate elements of the business, and have put arrangements in place to seek continuity of support and supply of public services.

Financial status:

• Debts owed before Monday’s liquidation process was put in place, constitute unsecured creditors’ claims in the liquidation process and those debts will line up at the end of the process, should there be any monies left after administering the liquidation process.
• PWC is trying to communicate with all those affected through:

o   Face to face direct meetings and conversations since Monday

o   PWC Carillion website set up as a focal point for those concerned – a dedicated team is set up to help.

• Legally binding payment promises issued by PWC are considered expenses of the liquidation process and these can be confirmed via receipt of a comfort letter. 

o Creditors will have to examine the exact contents of those commitment letters to gage the full scope of PWC’s authority to re-engage on contracts, i.e. what PWC is actually promising to pay for.

• All creditors, as usual, have to provide proof of contract and contractual delivery of goods, services and/or works in order to claim payment from PWC.
• The commitment letters should come via the normal Carillion employees – but should ensure they contain authority on behalf of PWC in support of the Official Receiver that the scope of the letter carries legally binding authority.
• If you receive a letter of commitment and the letter includes copy of the authority from PWC as official receiver, then continue working within the scope of the letter.
• This ONLY applies to all services PWC are asking for support on since Monday
• Project Bank Accounts – Subject to specific case circumstances, if Carillion is a trustee only and not a beneficiary of an account then PWC will not be able to stake claims on the cash assets within those trusts because naturally those assets do not belong to Carillion.
• It is usually a term of credit insurance policies that the insured is to minimise ongoing liabilities which, given Carillion operated on a 5 month trade credit cycle and those debts are under the liquidation process most likely lost, continuing to work for Carillion without an adequate letter of commitment could contravene credit insurance facilities.

Wider payment practices:

• Where the public sector has failed to adhere to public contracts regarding payment models, the Minister agreed to look into what can be done to reconcile the public sector procurement practices.

At a meeting with other industry leaders and Secretary of State for Business Energy and Industrial Strategy Greg Clark, the Minister responded to BESA's concerns by pledging that Government need to squeeze out every single lesson we can learn to guard against this situation happening in the future.

Specifically, Government and Industry need to take the following steps together:

• Industry needs to feed through to Government the specific data and circumstances of businesses hit by Carillion’s closure during the days ahead.

• Questions over the treatment of the different types of creditors should be put to the liquidators for information and clarity during the days ahead.

• The department for Business, Energy & Industrial Strategy (BEIS) should facilitate a meeting between industry and PWC (the insolvency practitioners) in the forthcoming days where PWC can clarify information and inform the market of the process during the days ahead.

• BEIS will facilitate a meeting between the Banks and industry leaders to ensure finance market nervousness is allayed and Government can take the opportunity to make clear that banks should not contribute to the insolvency domino effect by restricting finance when it is needed most and they should exercise leniency during this period.

• HMRC should be encouraged on a reasonable approach from BEIS, to exercise some leniency over payments due by affected market incumbents during the Carillion crisis.

• Production of a bulletin by BEIS regularly updating the market on information as the crisis unfolds will provide some consistent clarity to those hit hardest by the crisis.

• Lessons learned should also be fed into the construction sector deal.