Carillion: Any Lessons For The South African Construction Industry?

Carillion: Any Lessons For The South African Construction Industry?

The recent collapse of Carillion a British multinational facilities management and construction company which operated in the UK, Canada and Middle East is generating risks and opportunities that will have ripple effect across the construction industry in the countries it operated in.

RISKS

Carillion’s collapse holds clear risks, not only for suppliers’ cash flow and balance sheets, but potentially for the wider industry’s supply chain. Whilst the official receiver has reassured subcontractors that they will be paid for future work on Carillion projects, subbies and suppliers will join the list of creditors for any payments on outstanding work.

Carillion were partners on many joint ventures. The other contractors on these projects will be expected to take on the firm’s obligations. Whilst this will potentially boost their earnings, it will also be an additional and unscheduled call on their resources. Among other things the increased workload may dampen the firms’ appetite to bid for new projects in the near term.

The loss of such a major player threatens to reduce overall industry capacity, particularly for the delivery of major projects. This has implications for clients, especially for the UK Government as it looks to increase infrastructure investment as part of its Brexit strategy.

OPPORTUNITIES

Clients may choose to re-organise major projects in the future to increase the opportunity of a wider range of contractors, including medium sized firms to undertake such work.

What lessons can the South African construction industry draw from this collapse?

What do you think the implications are should a similar major player in South Africa collapses?

Are small and medium sized construction companies well equipped to seize the opportunities should a similar situation occur in South Africa?

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