Calls for overhaul of public procurement system after Carillion’s collapse

The public procurement system is stacked in favour of bigger firms, East Anglian business leaders ha

The public procurement system is stacked in favour of bigger firms, East Anglian business leaders have claimed. Picture: PA

Business leaders have warned that small firms in East Anglia could be left in jeopardy in the fall-out of construction giant Carillion's collapse.

The group, which employs 20,000 people across Britain, was forced into liquidation after failing to reach an agreement with lenders and the government – one of its biggest customers – over its £900m debt and £590m pension deficit.

And there are fears that small and medium-sized enterprises (SMEs) subcontracting services to Carillion could be left substantially out of pocket, leading to calls for a shake-up of the public procurement system to break the stranglehold of large contractors on the market.

Carillion is responsible for facilities management at prisons including Norwich, Wayland, Bure, Whitemoor in Cambridgeshire, Hollesley Bay and Highpoint in Suffolk and Chelmsford, and at other locations including Ipswich Crown Court. It is also part of the joint venture behind the A14 Cambridge-Huntingdon improvement works.

Nationally it also holds facilities management and maintenance contracts in schools, NHS hospitals and MoD properties.

David Howell, East Anglia area lead at the Federation of Small Businesses, said the crisis showed public procurement needed to be 'more small business friendly'.

'When the dust settles, there is a wider lesson to learn about the concentration of public contracts in the hands of a small number of very big businesses,' he said.

'It must become easier for small firms to navigate the system and the government should prioritise meeting its target of at least one third of taxpayer-funded contracts going to smaller firms.'

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He added: 'It is vital that Carillion's small business suppliers are paid what they are owed, or some of those firms could themselves be put in jeopardy, putting even more jobs at risk besides those of Carillion's own employees.'

Jonathan Cage, president of Norfolk Chamber of Commerce and chairman of the Chamber's planning and development group, said Carillion's collapse would send 'shockwaves' through the construction industry.

Managing director of Create Consulting Engineers Mr Cage said: 'It is essential that government acts immediately to ensure the collapse of this construction giant does not significantly impact the supply chain and that support is given to the SMEs that make up this complex structure.'

Apprentices' future

While there is grave concern for the future of 20,000 Carillion workers in the UK, the fate of its 1,400 apprentices has also been thrown into doubt.

The Construction Industry Training Board (CITB), based in West Norfolk, is working with the Department for Education and industry employers to establish a project team to prioritise the retention and redeployment of Carillion's apprentices.

In addition CITB has assembled an incentive package for other employers to take on the trainees.

Chief executive Sarah Beale said: 'While this will present the sector with a number of challenges, CITB's priority is to do all it can to ensure that Carillion apprentices can continue their training so their skills are not lost.'

Brian Berry, chief executive of the FMB, said: 'Construction SMEs train two thirds of all apprentices and are a sure-fire way of spreading economic growth more evenly through the UK.'