With construction juggernaut Carillion closing its doors, 30,000 subcontractors have been left stranded with outstanding debts being left unpaid, forcing some companies to scale back and make extensive redundancies. Banks to the rescue?
Lloyds Banking Group has released a statement, pledging £50m to aid firms connected with Carillion prior to its demise. This isn’t a hand out however, as the fund comprises of loan capital set aside that allows companies to borrow without and arrangement fees or repayments for six months. This will likely sustain companies, preventing them from descaling until the government or another construction giant such as Balfour Beatty step in to resume work on public sector projects. The sum of £50m was decided upon as the bank’s estimate of what the companies will need to remain afloat, although this figure will be revised if need be.
Post this move from Lloyds occurring, other banks have swooped in to out-do one another, including Royal Bank of Scotland chipping in £75m for Carillion related loans and HSBC making over £100m available for small businesses that are in need.
These funds are being pledged despite banks who loaned to Carillion being warned that they are likely to receive: “Less than a penny for every pound that they lent the company,” according to a statement made by Carillion creditors.
Businesses met with banks at the Department for Business, Energy and Industrial Strategy (BEIS) to deliberate how best to contain Carillion’s fallout.
A BEIS spokesperson said: “We have created a taskforce to continue to support and monitor the impact on small businesses and employees who have been affected by Carillion’s insolvency.
“The taskforce will comprise representatives from business, construction trade associations, the trade unions, lenders and government.”
The goal of this group is to ensure businesses are supported in the most viable way do they can remain trading. Should any be forced into closure, banks are currently in discussions as to how they can support individuals who are suffering as a result of Carillion’s closure. This will undoubtedly include a substantial number of people in the landscaping industry. One ex-employee from a landscaping company that was previously subcontracted by Carillion has said: “I arrive at work on Monday [15 January] and was just told to go home. I’ve heard nothing yet, so I’m fearing the worst.”
In addition to banks offering both business and individual loans, charities such as Perennial are providing support to people in the horticulture and landscaping sector who have been affected by Carillion. Additional support is set to come from companies within the sector who are opening their doors to taking on new staff, keeping opportunities available within the landscaping industries.
These are troubling times for companies affiliated with Carillion, however a government statement was issued saying that: “all is being done to help the small business that keep this countries economy going.” We shall wait to see if this rings true in the coming months.