#carillion#management#uk#construction#Supply Chain

Carillion collapse highlights the importance of insurance for suppliers

We’re only just into 2018 and already the business world has been shaken. The news that facilities management and construction services company Carillio...

Dean Smith, Divisional Director, Jobson James
|Jan 17|magazine9 min read

We’re only just into 2018 and already the business world has been shaken. The news that facilities management and construction services company Carillion had gone into liquidation made headlines across the UK, as many public and private sector projects, as well as thousands of jobs, are put under threat by the announcement.  

However, in addition to affecting workers and current projects, the announcement has many more far-reaching consequences. One group of businesses that will be hardest hit by this decision are firms tasked with supplying goods and services to Carillion in support of the projects on which the firm was working.

Many companies that were part of the supply chain for Carillion are likely to have seen a huge part of their business wiped out, with forecast income for the year facing a massive hit due to work suddenly stopping. The knock-on effect could be a number of supplier firms going into liquidation themselves, resulting in the potential loss of further jobs and businesses.

No company is impervious to going into liquidation. Suppliers should look at what has happened to Carillion and use this as a warning for what can happen if a firm they supply hits the buffers. It’s sensible to take steps to ensure they are prepared in the event that this happens to one of their clients.

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The good news is businesses can prepare themselves should the worse happen. For example, trade credit insurance can provide suppliers with a safety net should a large client collapse. Trade credit insurance allows firms to protect themselves against a risk of non-payment in the event of a client going into administration or liquidation. Trade credit insurance enables providers, particularly smaller organisations which rely on big contracts to stay afloat, to continue to receive enough income to pay staff and keep processes going until they can find new business to replace the lost client.

Firms may be concerned that the costs of getting trade credit insurance may be too great for it to be worthwhile, however, through working with an independent insurance broker, suppliers can ensure they get the best deal for their business. Insurance brokers will have vast experience in working with similar organisations, as well as with a range of insurance organisations, meaning they will be able to prepare an insurance package that meets the supplier’s needs, as well as finding an insurer who offers to most affordable package for them.

The business landscape is constantly changing and as the Carillion fiasco highlights, companies can become vulnerable at any time. Suppliers should avoid any tendency to rest on their laurels and simply assume that a big contract will be there forever – ideally, businesses should be looking at ways of protecting themselves should the worse happen. Through trade credit insurance, suppliers can work safe in the knowledge that should disaster strike, there is something to protect them, and by working with an insurance broker they will be able to find the right deal for them at an affordable price.