Sam Corbett, associate in the corporate restructuring and insolvency team at A&L Goodbody in Belfast, writes on the collapse of Carillion.

Yesterday morning, we woke to the news that many of us perhaps didn’t expect – Carillion had entered into liquidation placing jobs, other reliant firms, pensions and government contracts all at risk. Carillion was the UK’s second largest construction firm so the effect of its demise will be felt across the UK.

Carillion was placed into liquidation by Order of the High Court on 15th January 2018 along with a number of its subsidiary companies. The Official Receiver has been appointed by the Court as Liquidator of Carillion and is now responsible for the day to day control and management of Carillion and any of its other subsidiary companies that entered into liquidation. PwC LLP have also been appointed as Special Managers.

PwC’s role will be to assist the Official Receiver with the exercise of his/her powers and functions. The early key priority for the Official Receiver will be to ensure the continuity of public services while at the same time ensuring that his/her actions secure the best outcome for the creditors of Carillion.

Whilst it is, of course, early days in the insolvency process, the fact that Carillion has failed will cause concern for many – not least the thousands of employees whose jobs are now at risk and who face great uncertainty over the coming days, weeks and months.

The government appears to have stepped in to maintain continuity of public service contracts – at least in the short team – but the real pain is likely to be felt by the thousands of sub-contractors, suppliers, creditors and agents in the private sector potentially placing other jobs at risk further down the construction supply chain.

Construction insolvencies are notoriously complex given the myriad of issues that arise. Aside from the issues to resolve with employees, sub-contractors and suppliers, the assignment of ongoing contracts requires careful consideration especially given other knock on effects such as calls on guarantees, bonds and credit insurance, all of which are particularly prevalent within the construction sector. For an industry that is no stranger to corporate failures and insolvencies, the ramifications could be huge.

The liquidation process for Carillion will inevitably be protracted and it will not be a straight-forward realisation of assets – hence the need for the Official Receiver to engage PwC LLP as special managers.

As Carillion collapses, the immediate focus understandably turns to the many school and hospital projects (and services) that will be disrupted. The focus in the coming weeks and months will be on government contracts and the direct impact on the employees of Carillion, but the implications of Carillion’s collapse could be profound.