News in brief: the nightmare of Carillion continues; another retailing giant teeters on the brink; plus those firms most hit by the Covid-19 crisis

Pic: New Civil Engineer

News in brief: the nightmare of Carillion continues; another retailing giant teeters on the brink; plus those firms most hit by the Covid-19 crisis 

Long before Covid-19 affected the economy there were major problems for thousands of suppliers to ailing firms. A company struggling to pay its bills is one thing before finally collapsing but one that implodes due to gross mismanagement is another – with a prime example being the Carillion.

Pic: BBC

Liverpool stuffed by Carillion

In January 2018 the mega sized outsourcing company Carillion crashed and burned after months of denying there was a problem. The firm left creditors with billions in unpaid bills and the Government with red faces since even in 2017 the cabinet minister Chris Grayling had awarded it an HS2 contract worth millions.

The effects of its collapse continue today with the Daily Mail reporting this week on Liverpool’s £1.1bn unfinished hospital – another part of Carillion’s unwanted legacy. Now five years later the city could do with a new hospital with the area gripped by the Covid-19 outbreak.

The Mail reported: “Carillion's fall was thrust back into the spotlight this month when the City watchdog revealed plans to take enforcement action against its former bosses, with fines, bans from corporate roles and other penalties as possible options. The Financial Conduct Authority said directors, who it did not name, presided over a string of 'reckless' statements that gave investors a 'misleadingly positive' picture of its finances, even as it struggled to stay afloat in 2017. 

“Over five years, they also borrowed money and sold assets to help fund £376million worth of payouts to investors. Carillion failed in January 2018, owing an astonishing £7billion, making it one of Britain's biggest-ever corporate catastrophes. It put 20,000 jobs at risk and plunged projects such as the Royal Liverpool, already plagued by building issues, further into chaos. Critics have attacked not just Carillion and its directors, but also auditors at KPMG, its book-keeper, for failing to spot warning signs.”

Ian Carrotte of ICSM Credit said Chris Grayling and KPMG attempted to play down the sudden collapse but the writing was on the wall for years.

“In 2015 there were major concerns about Carillion when they issued a profits warning,” he said. “At the time they extended payment terms to some suppliers to 120 days which was dubbed reverse factoring. What a joke – it meant small businesses and contractors were in effect forced to give them free loans for three or more months.

“One of the lessons learned from the disaster is that nobody is too big to fail. Members often tell us at ICSM Credit that they have been given the excuse for late payment from a customer that they should be grateful for work from such a famous name and there is no danger of them going bust.”

Desperation for Topshop

Arcadia are in last ditch talks with lenders to secure a £30m lifeline to keep them afloat until next year when the Covid-19 crisis may have passed and footfall will return to normal.

The BBC reported that discussions  are understood to be progressing and a deal could be close to being reached while they said another report suggested the firm was on the brink of administration.

Arcadia said in statment: "It is not true that administrators are about to be appointed. Clearly, the second UK lockdown presents a further challenge for all retailers and we are taking all appropriate steps to protect our employees and other stakeholders from its consequences."

The BBC said in its report: “It is understood that Arcadia - led by Sir Philip Green - has contingency plans in place regarding the future of the business but there is confidence it will secure financing to continue trading. As well as Topshop, the group also owns the chains Topman, Miss Selfridge, Evans, Burton and Dorothy Perkins.”

Ian Carrotte of ICSM Credit said it was deeply unfair that non-essential retailers in England have been forced to close for four weeks until 2 December to contain the spread of the coronavirus.

He said: “Supermarkets are open with millions of customers heading to their stores this month and yet so-called non-essential shops have been shut. It is a recipe for businesses to go bust and it comes as no surprise that the likes of Topman and Burton are close to collapse.”

More of firms hit by Covid-19 lockdowns

The Government’s chosen method of suppressing the pandemic has been the lockdown, forcing shops and businesses to close and the public to stay at home as much as possible.

The upshot has been a string of bankruptcies and business collapses as their customers simply stay away. The travel and hospitality industries have been hammered with airlines going bust and holiday firms shutting up shop. Joining the long list of travel firms in administration is the UK-based VIP Ski firm who have traded successfully for 30 years until now.

A statement from the company read: “Despite the wonderful support of our guests, colleagues and partners, we have been unable to navigate the extraordinary challenges of managing a winter ski operator through the current COVID crisis. We are sorry to announce VIP SKI has ceased trading today.”

Another sector hit by the lockdowns is the motoring industry with car sales dropping off a cliff. During the summer more cars were sold in 1947 than were sold in the second and third quarters of this year to give an idea of how the business has gone west. Automotive Bearings Limited of  Wisbech in Cambridgeshire are one of many motor related companies that have seen their viability destroyed in 2020.

With fewer people going into their city centre offices this year it is no surprise that firms that rely on their lunchtime trade have suffered. Another casualty of the trend is The Staff Canteen who bill themselves at the UK's leading networking website for chefs, with the latest chef jobs, recipe ideas, supplier information and chefs' resources. The on-line trade journal has seen advertising dry up and their events curtailed.

The list of insolvencies grows by the month with this week the construction outfit Bradley Homes were wound up, Golden Bowl Events went bust and the Wheatsheaf Coffee Café also came to an end. All three represent aspects of the economy that have been hit. There are hundreds more each week in the pub and hotel business, the High Street retailing sector and manufacturing as supply drops off. And although some hauliers are doing well many are not as the vast bulk of what is transported by road is for shops and manufacturers. It’s a pretty depressing situation.

About ICSM Credit

ICSM Credit has more than four decades of experience as a credit intelligence group whose members gain inside information about firms in trouble allowing them to avoid bad debts and rogue traders. To join costs less than a tank of fuel - while at the moment there's a special free temporary membership offer during the Covid-19 crisis which gives access to free legal letters. ICSM also has an effective debt collecting service which has a global reach - ask for details from Paul.

For details about ICSM Credit call 0844 854 1850 or visit the website or email Ian at on how to subscribe and to join the UK’s credit intelligence network to avoid bad debts and late payers. Follow ICSM Credit on FaceBook, Twitter and YouTube and Ian Carrotte on LinkedIn.

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