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Warning to small firms on dangers of financial problems at outsourcers

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Thousands of jobs and hundreds of small businesses in the region could be threatened by the financial troubles facing large outsourcing groups according to insolvency trade body R3. “Many hundreds of local subcontractors rely on indirect payments from government projects, but these subcontracts are not always the prize they may seem. Margins are usually very tight, so it is easy to make a loss and, ultimately, small firms rely on the main contractors to pay them,” said R3 Eastern chair Mark Upton, a partner at Ensors Chartered Accountants. The Eastern branch of R3 is encouraging subcontractors to be more vigilant when entering into such arrangements.

“In the event of a contractor’s collapse, businesses owed money should contact the administrator. Subcontractors are usually classed as unsecured creditors and come behind banks and employees in the queue for payment. Those at risk should take professional advice as soon as possible,” said Mark Upton. A recent Institute for Government report showed that £284bn or around a third of annual public expenditure goes to external suppliers, with indirect payments to small firms accounting for around £34bn.

Big suppliers have increased their share of government spending, and some are now facing financial problems. The IfG report says the government currently has little understanding of how many subcontractors there are and is calling for better data and greater transparency in the supply chain.

Last Updated ( Wednesday, 12 June 2019 11:57 )