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Carillion accused of using 'delay tactics' and withholding payments by suppliers

Rhiannon Curry
Subcontractors say Carillion found excuses not to pay suppliers - AFP

Carillion used delaying tactics and withheld money as security on work in order to defer payments to suppliers and bolster its own balance sheet, small businesses have claimed.

The failed contractor has been accused of taking up to 120 days to pay subcontractors despite being signed up to the Government's prompt payment code that is meant to ensure suppliers are not left waiting for payment.

Emma Mercer, Carillion's most recent finance director told MPs at a parliamentary select committee last week that in reality the average payment time for suppliers was 43 days last year, and said those who were waiting as long as 120 were "outliers", accounting for less than 5pc of contracts. Less than 10pc were waiting more than 60 days, she said.

But subcontractors have said Carillion found excuses not to pay. Chris Perry, a director of facilities management firm Perrymac, said he was often left waiting up to 120 days for payment as Carillion used "delaying tactics" such as finding fault with invoices and "minor discrepancies" with the work.

How to avoid having a Carillion in your portfolio

Perrymac worked under Carillion on a contract to manage toilet facilities at Heathrow Airport. The contract has since been taken over by ISS and Mitie.

"Our original terms were 60 days, but [Carillion] put us on 120 days," Mr Perry said.

"In the end we decided we wouldn't operate unless we had a purchase order [a detailed breakdown of services] from them so we knew we would be paid." Mr Perry said he was owed £40,000 in unpaid bills and had stopped taking money out the business to avoid making workers redundant.

Rudi Klein, CEO of the Specialist Engineering Contractors' Group, called Carillion a "commercial bully" over its treatment of supply chains.