Cambridge-based landscaping company Flora-tec is one of thousands of small suppliers that have been hit by the collapse of Carillion.
Its managing director, Andy Bradley, said he had to make 10 people redundant – out of 90 – on Monday after Carillion went into liquidation. He was told by PricewaterhouseCoopers, the accountants handling the liquidation together with the official receiver, that Flora-tec would be paid only for work done since then.
Flora-tec is owed £1m (£800,000 plus VAT) – more than 10% of its annual turnover – by Carillion for gritting and snow-clearing work carried out at schools, hospitals, prisons and courts in the past two months. Flora-tec was due to be paid for the work next week.
Carillion relied on major contracts, some of which proved much less lucrative than it thought.
In 2018 it slashed the value of them by £845m, of which £375m related to major public-private partnerships (PPPs) such as Royal Liverpool University hospital.
As its contracts underperformed, its debts soared to £900m.
The company needed a £300m cash injection, but the banks that lent it money refused to put more in.
The government also refused to step in and bail the firm out.
That left the company unable to continue trading and forced it to go into liquidation.
His staff were up at 3am during last month’s cold spell, clearing snow and putting salt down. Carillion’s collapse could not have happened at a worse time, Bradley said. “We are not going to see a cent of that money.”
He warned that the business was unlikely to survive and many other small firms would go under unless the government set up an emergency fund. “I’m not asking for charity, I’m asking for time,” he said.
Bradley added: “We’ve got a profitable business, but we can’t trade out of a black hole of £1m … I set up the business 20 years ago from nothing and now it’s going to go back to nothing.” The former seeds trials manager set up Flora-tec as part of Unwins seed company and led a management buyout of the business in 2007.
He said he felt “duped and betrayed” by the government, which had been handing Carillion new contracts despite the company issuing two profit warnings last summer.
“The government actively encouraged SMEs [small and medium-sized enterprises] like us to get involved in public sector contracts. Carillion then put out a profit warning last summer. Normally I would go: ‘I need to reduce my exposure to this business’. But the government awarded them billions of pounds’ worth of contracts. What message is that sending to SMEs? It’s saying to me: the government has done its due diligence and has confidence in Carillion.”
He added: “The government should hang its head in shame. We are the people the government let down. Loads of SMEs will go out of business over this.”
