Greg Clark faced MPs’ questions about retentions and 120-day payment periods that left suppliers exposed
Business secretary Greg Clark has been forced to defend the goverment’s failure to protect the supply chain in the wake of Carillion’s collapse.
While refusing to be drawn on past policy decisions, he conceded there were a number of lessons to be learnt from the construction conglomerate’s failure.
Speaking in parliament yesterday Clarke said: “Retentions and project bank accounts have been the subject, in response to those and other concerns, of a consultation on specific measures, which closed very recently. That came out of the recommendations that were made.
“The lessons and the scrutiny of what went wrong in Carillion, both on the part of its directors and its scrutineers, and in the oversight that took place across the whole of the public sector in terms of contracting, need to be looked at and will be looked at, including by select committees of this house. Whatever actions are required from that, we will take.”
The lessons and the scrutiny of what went wrong in Carillion, on the part of its directors and its scrutineers, and in the oversight that took place across the whole of the public sector in terms of contracting, need to be looked at
His comments came in response to questions from Labour MP Rebecca Long Bailey about what action government had taken on information provided by the Federation of Small Businesses (FSB) and the Specialist Engineering Contractors (SEC) Group last year that highlighted Carillion’s problematic payment practices.
She said: “They (the FSB) highlighted that Carillion’s payment period was doubled from 65 to 120 days, that Carillion made money on the back of early payment by charging fees, and that regulation 113 of the Public Contracts Regulations 2015, which relates to 30-day payment, was not being enforced.”
Long Bailey went on to say it was clear government had taken no action in relation to Carillion’s failure to comply with prompt payment standards.
She said: “That is not all: the FSB and SEC Group also highlighted how retention moneys and project funds due to suppliers were not being protected from Carillion’s potential insolvency.
“As a result of the Government’s inaction, microbusinesses are now owed on average £98,000, small firms £141,000 and medium-sized firms £236,000, and large businesses are owed on average £15.6m.”
Earlier in the day, the joint inquiry into Carillion’s collapse by the Work and Pensions and Business, Energy and Industrial Strategy Committees got under way with trustees of the Carillion pensions schemes, The Insolvency Service and the Financial Reporting Council all facing MPs.
Carillion executives including former chief executive Richard Howson, chairman Phillip Green and ex-financial director Richard Adam are due to be questioned by MPs next week.