The firm is concerned that many firms which supplied services and goods to Carillion may not receive payments they were due causing financial difficulties in these businesses over the next three to six months and which could, in turn, result in some of the supplier businesses themselves becoming insolvent.

Carillion’s standard payment terms to suppliers was 120 days meaning many creditor firms will be due substantial sums for the period from September 2017 onwards. As it is unknown if any dividend will be paid from the liquidation and how much it will be this could cause considerable financial difficulties for many of these businesses in the short to medium term.

The liquidators’ state that: “all agents, subcontractors and suppliers should continue to work and provide goods and services as normal, under their existing contracts, terms and conditions. You will get paid for goods and services you supply from 15 January 2018.”

While this indicates that there will be work for these companies in the near future there is no mention of funds due prior to 15th January 2018 which could cause a substantial financial headache for businesses relying on that money to pay their own staff and creditors.

Eileen Blackburn, head of restructuring and debt advisory at French Duncan LLP, said: “Often when a large firm goes into liquidation there is considerable fallout for the many smaller businesses supplying goods and services. These companies cannot afford to take a hit on outstanding payments and consequently may be unable to continue to provide services and goods to the business. Given that the timescale for any resolution of the liquidation of Carillion is likely to be many months a lot of these firms may find it difficult to survive.

“How much any creditor receives from a liquidation may be largely academic if the business cannot survive the next few months. It is essential, therefore, for business owners that have been affected by the Carillion liquidation to assess their situation immediately. Check with your bank and creditors to see how much flexibility you have and cut costs where possible.

“Also ensure you make any claims to the liquidator immediately and maintain good communications with them so you are aware of how the liquidation is proceeding. If you find you cannot continue financially you should seek advice immediately and it may be possible to arrange a Company Voluntary Arrangement (CVA) which is an appropriate recovery tool for otherwise profitable companies to recover from a ‘one-off’ bad debt. This allows a company to repay their creditors and continue as a going concern. However, a CVA can take some time to arrange, therefore an early approach to a professional advisor is recommended.”

The construction sector in Scotland has already been facing difficulties with the most recent figures from the Insolvency Service revealing the sector comprised 22.6% of all Scottish corporate failures in Q3 and this an increase of 66.6 on the previous quarter. The latest Scottish GDP statistics also revealed that the construction sector had fallen for the last seven quarters and was down by 2.9% in the latest quarter indicates that any further difficulties could hit the sector hard.

Eileen added: “There is always a risk when smaller companies become overly dependent upon a larger business such as Carillion. While it can seem like the perfect solution to have a major client providing regular, profitable contracts which is unlikely to ever face insolvency it is clear from the Carillion liquidation that there are very few businesses that are too big to go bust.

“All business owners should be aware of any potential difficulties faced by their clients and act quickly to ensure that they don’t find themselves facing a similar fate to Carillion.”