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Architects ‘may struggle to get payment from Carillion’

Met midland hospital edward williams
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Architects working with Carillion have been urged to ‘continue as normal’ despite a warning that they might struggle to get hold of money owed by the stricken giant

Yesterday (15 January) six experts from accountancy firm PWC were appointed as ‘special managers’ with court-handed powers to support the liquidator of the £4 billion-turnover contracting, development and support services conglomerate.

PWC, which said it would be writing to Carillion’s suppliers shortly, added in a statement: ‘Unless advised otherwise, all agents, subcontractors and suppliers should continue to work and provide goods and services as normal, under their existing contracts, terms and conditions.

‘You will get paid for goods and services you supply from the date of the official receiver’s appointment onwards. Over the coming days we will review supplier contracts and we’ll contact you concerning these soon. Goods and services you supply during the liquidation will be paid for.’

But Construction Products Association economics director Noble Francis said there could be a bumpy road ahead for any designers already owed by Wolverhampton-based Carillion.

He said: ‘The media will understandably focus on the 20,000 Carillion employees, but an even bigger issue is likely to be the smaller firms in the supply chain, whether they are architects, sub-contractors or suppliers, as they are more reliant on cash flow and won’t get bailed out by the government.

‘The rest of the supply chain may struggle to get payment from Carillion now, particularly smaller firms. It’s difficult to measure the extent of the issue at this stage.’

The even bigger issue is likely to be the smaller firms in the supply chain

David Birne, insolvency partner at accountancy firm HW Fisher & Company, said it was ‘extremely rare’ for a company Carillion’s size to opt for a liquidation – where a company’s assets are sold and it is then closed down – rather than an administration.

‘It suggests there is little, if anything, of value within the company to be saved,’ he warned. ’There will undoubtedly be a knock-on effect for companies that supply Carillion that will go all the way down the supply chain to the smallest firms.’

Scores of architects were assessing their exposure to Carillion this week.

5Plus Architects is working on an office development at Manchester Airport for a development consortium including Carillion.

Practice director Phil Doyle told the AJ: ‘The joint venture includes the Greater Manchester Pension Fund, Beijing Construction Engineering Group and the Manchester Airport Group, so, although there may be some issues, I don’t think it is a mega-problem.’

Manchester Airport Group property chief executive Lynda Shillaw said: ’The Airport City JV is focused on working with our investors and occupiers in the planned next phase of delivery to ensure that their requirements continue to be met.

’The current construction of the Airport City development is being undertaken by Beijing Construction Engineering Group International and is not affected by the issues at Carillion. 

’Carillion have been a Joint Venture partner in the Airport City project since its creation in 2013 and we will work with PwC where necessary.’

Meanwhile, 5Plus is also involved with the Vaux Brewery conversion in Sunderland, where Carillion is working as a contractor as well as in a development partnership with the city council and Igloo Regeneration. 

‘Again there is more than one party [backing the scheme],’ said Doyle. ‘It may slow things down but that scheme has been slow for 18 months. Many property schemes are like that at the moment – everything is taking multiple looks and checks.’

Meanwhile, concerns remain about when Carillion’s much-delayed £335 million Royal Liverpool University Hospital, designed by NBBJ and HKS, will finally open. The project was due to complete in March 2017, but the discovery of cracks in two concrete beams requiring significant remedial work in January last year pushed the handover date provisionally back to March 2018.

According to media reports, workers were sent home yesterday on the already behind-schedule Midland Metropolitan Hospital, which is being designed by Edwards Williams Architects and HKS. The £588 million ’glass palace’ project had been scheduled to finish later this year but is not now expected to complete until at least June 2019.

HKS Architects principal Francis Gallagher said: ’It’s saddening for everyone involved when a project partner hits difficulties such as this. 

’We have a global practice and this minimises risks and exposure for us. It is far too early to say what will happen with individual projects, but we will be working closely with stakeholders to ensure the best possible outcomes for the schemes we are involved with.’ 

The delayed Midland Metropolitan Hospital project by Edward Williams Architects

The delayed Midland Metropolitan Hospital project by Edward Williams Architects

The delayed Midland Metropolitan Hospital project by Edward Williams Architects

Carillion chairman Philip Green said on Monday: ‘This is a very sad day for Carillion, for our colleagues, suppliers and customers that we have been proud to serve over many years.

‘Over recent months huge efforts have been made to restructure Carillion to deliver its sustainable future and the board is very grateful for the huge efforts made by Keith Cochrane, our executive team and many others who have worked tirelessly over this period.

‘In recent days, however, we have been unable to secure the funding to support our business plan and it is therefore with the deepest regret that we have arrived at this decision. We understand that HM Government will be providing the necessary funding required by the official receiver to maintain the public services carried on by Carillion staff, subcontractors and suppliers.’

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