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The collapse of Carillion has been reported as the decline of one of the big beasts of construction. What has been missed from the headlines though is what it means for the smaller companies reliant on contracts which such firms. 
The collapse of Carillion has been reported as the decline of one of the big beasts of construction. What has been missed from the headlines though is what it means for the smaller companies reliant on contracts which such firms. 
More than 40% of the firms in construction industry are either sole proprietors, or have one member of staff, while the number of firms which meet the employer requirements to classify as a Small to Medium Enterprise (SME) account for more than 99% of the industry. Large firms employing more than 100 people have a substantial advantage in terms of purchasing power and price setting; however it is the smaller firms which make up the majority of the sector. 
It would not be reasonable to assume that self-employed contractors could take on large scale infrastructure projects, such as HS2 or Hinkley Point C. The way in which procurement is run, however, could see a greater focus on the use of these smaller contractors for the works they are capable of carrying out. Recently, for example, the volume of output for repairs and maintenance work within the sector has increased, even while overall output is shrinking. These jobs provide an opportunity to break away from employing large single point contractors, and utilising more smaller firms from the local areas. It is down to the smaller firms as well though; they need to address their capabilities to ensure that they are not becoming too reliant on any one client to supply their orders. 
Overall there needs to be greater diversification within the industry to insulate companies against the potential for systemic collapse, as the collapse of Carillion has threatened, while also helping to boost the growth of the industry as a whole. In an industry so reliant on small firms it seems inconceivable that the largest companies could still be in a position where they are to all intents purposes “too big to fail”. The fall of Carillion, however, may provide the foundations for the growth of the SME’s. 
Tagged as: Carillion, Sector, SME
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