Carillion – what happens next with contracts?

Following the announcement that Carillion have commenced a compulsory liquidation process this morning, Lee Causer, Partner and construction industry specialist says:

“The collapse of Carillion will be hugely disruptive for the construction industry, both for customers and suppliers, as well as creating particular angst for employees who clearly face a great deal of uncertainty at this time.”

Customers
“Many customers will have had clauses in their contracts that allows them to break those contracts, conditional on Carillion’s financial strength and solvency.

“Whilst some customers may have developed contingency plans, it is inevitable that Carillion’s collapse is going to lead to delays in project delivery and cause further disruption to the supply chain. Customers themselves may face claims for breach of contract or liquidated damages for delays encountered.”

Suppliers and sub-contractors
“Many of Carillion’s suppliers will have automatically assumed that a group the size of Carillion would be rescued. Therefore, many will not have prepared for its collapse and will struggle to get alternative contracts in place.

“The failure of Carillion will inevitably lead to disruption across the supply chain, and financial turmoil for sub-contractors who relied on business from Carillion.

“Its collapse could trigger a number of insolvencies across the construction sector, in an industry that already experiences the highest levels of insolvency per year in the UK. The ramifications of the failure of Carillion could be huge.”
 

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