Industry news

The private sector outsourcing market soared to a three-year high in 2017 as businesses signed contracts worth £4.93 billion, according to the Arvato UK Outsourcing Index.

The research, compiled by business outsourcing partner Arvato and industry analyst NelsonHall, found that the total value of contracts signed by UK companies rose 36 per cent year-on-year, from £3.62 billion in 2016 and £1.84 billion in 2015.

Overall the UK outsourcing market saw an increase of nine per cent year-on-year in 2017, with contracts worth £6.74 billion agreed by the public and private sectors over the period.

A surge in technology investment was behind the strong performance in the private sector, according to the findings. Businesses spent £3.82 billion on procuring IT outsourcing (ITO contracts) agreements in 2017, more than double the value of deals agreed in 2016 (£1.73 billion).

The analysis shows that companies focused their spending on securing multi-process IT deals, which included new hosting services, equipment, network infrastructure, data centres and application management. Customer services accounted for almost half (46 per cent) of business process outsourcing (BPO) agreements signed by companies last year. Firms spent a total of £508 million as they looked to deliver improvements in customer experience across traditional and digital channels, according to the findings.

Debra Maxwell, CEO, CRM Solutions UK & Ireland, Arvato, said: “The private sector is increasingly outsourcing more sophisticated work, with firms turning to external partners to introduce new technology and enhance the customer experience.

“This shift towards greater complexity is contributing to more outsourced services being delivered here in the UK. Just two per cent of private sector deals procured last year will be delivered offshore, compared to 12 per cent in 2016, as outsourcing continues to move up the value chain.”

Overall, fewer deals were agreed across the UK outsourcing market last year, with 98 procured compared to 165 in the 12 months previous, according to the research.

The rise in spending in the private sector market comes as activity across the government market fell year-on-year. Central government departments and councils signed contracts worth £1.82 billion in 2017 compared with £2.59 billion in 2016 – a 30 per cent drop.

Excluding work procured for healthcare, the data shows that the average value of deals signed across government was down 42 per cent year-on-year in 2017

Debra Maxwell added, “In line with calls for a review of the government outsourcing model, the findings show the public sector is already moving away from procuring long-term, high-value outsourcing contracts.

“Councils and central government departments are now accessing the technology and expertise they need to deliver a range of functions, from digital service transformation to cybersecurity, through smaller contracts for productised services.”

Financial services leads private sector growth

The analysis shows that a sharp rise in the value of outsourcing contracts procured by financial services businesses was behind the growth in private sector spend last year.

Companies across financial services agreed deals worth £3.26 billion in 2017, more than treble the total value of contracts agreed in the previous year (£829 million).

According to the research, the growth can be attributed to a sharp increase in ITO spending as firms turned their attention to deals in application management, application hosting and end user computing. The findings show ITO contracts worth £2.70 billion were signed across the sector last year, up from £208 million in 2016.

Pat Quinn, CEO of Arvato Financial Solutions UK & Ireland, said: “Financial services businesses are under pressure to transform, particularly in the wake of high-profile security threats and the upcoming GDPR obligations.

“The findings show that a growing number of companies see outsourcing as key to addressing the challenge, delivering the resilient infrastructure and architecture they need to protect against cyber attacks, keep their data safe and comply with new privacy legislation.”

Alongside financial services, telecoms & media and energy & utilities were the most active sectors in the UK outsourcing market, procuring deals worth £1.08 billion and £279 million respectively, according to the findings.

The research showed that the average value of contracts signed across the private sector more than doubled to £91 million in 2017, from £36 million in the previous year.

The Arvato UK Outsourcing Index is compiled by leading BPO and IT outsourcing research and analysis firm Nelson Hall, in partnership with Arvato UK. The research is based on an analysis of all outsourcing contracts procured in the UK market during 2017.

Other headlines from the full-year 2017 Index include:

A total of £1.80 billion was spent on business process outsourcing (BPO) deals, representing 26 per cent of the overall UK outsourcing spend in 2017.

The total value of ITO contracts accounted for 73 per cent of the UK market, with contracts signed worth £4.90 billion.

Combined BPO and ITO agreements signed during the period were worth £58 million, accounting for one per cent of the overall spend.

IT and outsourcing giant Cognizant blazed an important new trail this week, announcing 10% annual revenue growth despite a reduction in headcount globally – the first company of its size in this sector to display annual growth without a concomitant expansion on its employee base.

The drop in staff numbers of around 200 may seem like a small drop in Cognizant’s employee ocean of over 260,000 employees, but nevertheless some analysts are seeing the news as indicative of a fundamental shift as the largest IT and services players look to solve the existential question of how to leverage automation and digital technologies to maintain growth whilst shrinking costly headcounts which in several cases encompass hundreds of thousands of employees.

Moreover, the overall reduction of 200 workers comes despite Cognizant’s taking on approximately 6,000 new employees in the US, suggesting that much of the drop has taken place in India where much of the company’s more transactional work is delivered.

"As the industry moves from the labour arbitrage factory model to the technology-based digital model the revenue per person rises and fewer people are needed… Cognizant is one of many firms which is driving hard into the new digital marketplace and this effort is showing results both in their increased growth and the improved revenue per person and falling headcount," said Peter Bendor-Samuel, CEO of analysts Everest.

Cognizant’s noteworthy first may soon be matched by a couple of its competitors, especially Infosys and TCS which have reported declining employee numbers over recent quarters but whose annual results are not out until April.

Amazon Web Services’ (AWS) domination of the global public cloud market is coming under increasing pressure from competitors Microsoft and Google, according to data released last week by analysts from KeyBanc. In Q4 last year AWS had 62% market share, down from 68% in the same period in 2016; Microsoft Azure’s share jumped from 16% to 20% over the same period, while Google’s rose from 10% to 12%.

The KeyBanc report includes an estimate that Azure’s contribution to Microsoft’s revenues grew by nearly 100%; Amazon’s own figures suggest that AWS grew by 42% in revenue terms in the third quarter of last year.

While these figures suggest that Microsoft and Google are pulling away from the “rest of the rest” in the public cloud market, one provider with the financial clout to make a serious bid to close the gap is China-bases Alibaba, which announced last week that its cloud business grew 104% in the last quarter. By some measures this makes Alibaba the fastest growing major cloud provider in the world at present – though like its nearest competitors it still has a long way to go before it threatens AWS’ throne.

The UK has been reported to have the fifth largest gender pay gap in Europe — with a larger pay gap than Portugal, Slovakia and Switzerland. According to 2017 figures, the gender pay gap between males and females in the UK was still 20% — this meant that, by October 16th 2017, the average male had already been paid a women’s entire year’s salary. Worryingly, the UK’s gender pay gap is worse than the average gender pay gap across the whole of Europe.

In an attempt to gain equality in the workplace and show transparency, by April 2018, companies that employ 250 employees or more will have to publish gender pay figures. The BBC is one organisation which has already had to release the salaries of its employees who earn more than £150,000 — and an organisation that proved there clearly is a gender pay gap in the UK. The highest paid female employee at the BBC was Claudia Winkleman, Strictly Come Dancing host, earning £500,000. A considerable amount. However, when you consider the highest male earner was Chris Evans, radio DJ and ex-Top Gear presenter, earning £2.2 million, there is a significant difference!

And it appears, a similar pattern is apparent in other industries, too. DCS Multiserve, specialists in industrial cleaning, outlines which industries have the worst gender pay gaps in UK, and compare figures with previous years to investigate if we are making improvements to close the gap.

Which industries are the worst culprits?

The industries which tend to have the largest gender pay gap are those which have a workforce predominantly of one gender. Over 80% of companies are said to pay their women employees less than their male employees. The construction industry, in particular, is a male-dominated industry which has led to a significant gender pay gap. The average male in the industry earns up to 45% more than their female counterparts! However, the same can be said for midwifery, a predominantly female industry – female midwifes on average can earn around 62% more than their male counterparts.

Financial managers and directors gender pay gap also favour men, with women generally paid up to 36.5% less than men — and the same for journalism, with a gender pay gap of 7.2%. The same pattern is also shown for solicitors where females earn around 14% less than men, pharmacists where females earn around 12.6% less than men, and nurses who earn around 1.5% less than men — despite nursing being a typically female dominant role. Whilst in some roles women are paid more, when you look at the industry as a whole, no sector pays women more than men.

And it is not just average salaries which appear to be higher for men — they also receive on average 25.2% higher bonus payments, too.

With the deadline set for companies with over 250 employees to publish their salary figures by April this year, 527 firms have published their figures already. EasyJet was amongst the companies with the largest gender pay gap. At the company, women’s hourly rates are 52% lower than men’s — a reason for this could be the male to female ratio in the higher paid jobs compared to the lower paid jobs. Only 6% of EasyJet’s UK pilots are female — a role which pays around £92,400 annually on average. However, of all UK cabin crew staff, 69% are female which pays an average annual salary of £24,800.

Are we making improvements?

Whilst the UK still has the fifth largest gender pay gap, the Office for National Statistics (ONS) reveals that our pay gap is at the lowest it has been since records began. London used to have the smallest pay gap in the UK, but whilst other regions have worked to improve their gender pay gaps, it appears that the capital has stood still. However, over the last two decades, the average gender pay gap in the UK has decreased by 9.1%.

In 1997, the average gender pay gap was 17.4% when the ONS first collected data — but despite the progress, industry professionals believe the improvement is too slow and that the government need to be putting pressure on companies to close the gap sooner.

Frances O’Grady, general secretary of TUC, commented “The full-time gender pay gap has inched a bit smaller. But there is still a chasm between men and women’s earnings. At this rate, it’ll take decades for women to get paid the same as men.

“The government needs to crank up the pressure on employers. Companies shouldn’t just be made to publish their gender pay gaps. They should be forced to explain how they’ll close them. And those bosses who flout the law should be fined.”

Sources

https://www.ft.com/content/8ddac9d8-eca6-11e7-8713-513b1d7ca85a

http://www.telegraph.co.uk/women/work/gender-pay-gap-industry-new-government-tool-find/

http://www.telegraph.co.uk/business/2017/11/27/london-goes-best-worst-gender-pay-gap/

http://uk.businessinsider.com/gender-pay-gap-calculator-tool-ons-2017-7

https://www.gov.uk/government/publications/dft-gender-pay-gap-report-and-data-2017/dfts-gender-pay-gap-report-2017

http://www.bbc.co.uk/news/uk-42580194

https://www.theguardian.com/business/2017/oct/26/uk-gender-pay-gap-narrows-to-lowest-for-20-years-but-is-still-91

Today's businesses face threats from two main sources: a lack of strategic alignment internally and malicious attacks from hackers externally. This leads many to fall into the trap of taking a reactive approach to IT, constantly fire-fighting to resolve operational issues. Here, Nigel Crockford, Business Development Manager at IT consultancy eSpida, explains why this approach of running-to-failure is not helping your business grow.

There is a tendency in most businesses for people to work in silos. According to a study by Harvard Business Review, 75 per cent of cross-functional teams are dysfunctional. Whether it's because of budgets, scheduling, meeting specifications and customer expectations, or aligning the goals of your department with that of the company's corporate goals, creating a unified approach to IT can be difficult.

This lack of a joined-up approach means that most businesses take a reactive approach to IT, dealing with problems as they arise. Factors such as ageing equipment, a natural disaster or a security breach inevitably demand time and attention to solve and can cause costs to spiral.

Optimising IT

A company's ability to handle such problems can be measured using the infrastructure optimisation (IO) model developed by Microsoft. It categorises an organisation’s level of IT optimisation into one of four categories: basic, standardised, rationalised and dynamic.

Companies with basic optimisation only deal with IT on an ad-hoc and reactive basis. They are driven by problems and simply want to survive with the least downtime possible, which usually propagates a culture of running equipment until it fails. The problem with this approach is that it diminishes the ability of leaders to accurately control growth because they constantly have to fix problems that could directly impact operations.

The standardised approach, while still reactive, is more stable. Here, the business has taken steps to put some procedures related to change management and planning into place. Upgrades are request-driven and there is a mentality of "keeping it running".

The rationalised approach is the point a business becomes proactive and it's where most large businesses currently sit. There is usually a dedicated IT department, with well-defined IT roles such as Network Architect, Software Engineer and Project Manager. The business has a good grasp of formal change management methods, there is accountability across the board, increased monitoring and defined service level agreements (SLAs).

As a result, under the rationalised approach, IT management becomes more predictable and the organisation becomes better at dealing with disaster recovery and business continuity problems.

Finally, we come to dynamic optimisation. This is for large scale, usually multinational, businesses such as global courier services and banks that deal with hundreds of thousands of transactions at any one time. This kind of organisation would fail if it didn't take a proactive approach to IT, as systems are highly optimised and there is a core focus on cost reduction and quality improvement.

Dynamically optimised businesses are agile and better able to recover from malicious attacks and natural disasters. This characteristic means they take the lead in delivering high availability and resiliency and yield a better competitive advantage as a result.

Needs vs. skills

While no organisation actively wants its IT system to only be basically optimised, moving to the next level up is not always easy. Managers that want to improve their IT optimisation need to understand their needs in sufficient detail. To understand their needs, they need the right mix of people with the knowledge, skills and experience to improve processes.

A growing skills gap in the technology sector means that the necessary skills are increasingly becoming more difficult to find in-house. According to the latest Hays Global Skills Index report, "skills shortages remain prevalent, particularly in technical engineering roles, specialist technology and qualified finance roles".

As a result, 72 per cent of businesses currently outsource their IT infrastructure, according to Deloitte's 2016 Global Outsourcing Survey.

However, for all the benefits that outsourcing provides, it still has its caveats. Vendor managed services can suffer from poor service quality, a lack of responsiveness, a lack of innovation and a reactive rather than proactive stance to dealing with problems.

IT leaders that outsource without carefully considering exactly how it is helping the business compensate for its own lack of skills might find that they only displace the problem rather than solve it.

Rightsourcing

As a business that provides IT consultancy for a wide variety of customers, eSpida believes in the concept of rightsourcing. Whereas outsourcing involves contracting the work out to a third-party service provider, and insourcing involves keeping the work in-house based on current skills, rightsourcing is about selecting the best way to procure a service.

This might mean upskilling existing staff by improving training or working with third-party suppliers to become better at managing IT to deliver value to the business.

The first step in this process is conducting an IT healthcheck. Here, IT leaders need to audit the business for current and future projects to see where infrastructure problems could occur and whether the current systems and people can meet this demand.

For example, a construction business might have upcoming building projects where an increase in the number of users on site will increase the need for connectivity. The same project might need to cater for the scheduling of delivery vehicles, networked devices, remote working, dispatch and onsite project management tools.

Once the cost, budget and business impact has been considered, IT leaders need to look at whether the business has the right skills to achieve the project in-house. To help match the skills of the workforce to the needs of the business, leaders can use the Skills Framework for the Information Age (SFIA).

The SFIA model rates the IT competency of a business on a scale of one to seven, one being the basic ability of the ICT professional to follow and complete tasks under supervision, and seven being the ability to set policy, inspire and mobilise.

Most businesses operate at around four to five on the scale. Here, departments begin to move out of silos and operate with a higher level of technical skill, using a strategy that enables the IT people to advise the business more proactively.

Moving to the next stage on the model, up to a five to seven on the scale, is the point where many businesses seek help from external consultants to provide specialist support on how they can provide a dynamic response for their entire operations around the world. Moving to a more dynamic position involves the delivery of an IT system with built-in high availability, resiliency and the ability to recover quickly from disasters.

Malicious attacks such as those seen in the recent WannaCry ransomware attack affected around 230,000 computers in 150 countries around the world, including the UK NHS. Some of the systems in the NHS were so badly affected, it had to limit them to an emergency-only basis during the attack. Having a disaster-recovery plan for these situations, means that data can be recovered quickly to get the business operational.

By changing their approach to IT from one of running equipment to the point of failure to one where skills, agility and rightsourcing are prioritised, business leaders can spend less time fire-fighting and more time growing the business.

Two Republican senators have launched a bill which, if approved, would expand the annual quota of those being granted the controversial H-1B visa – used heavily by tech and outsourcing companies to bring skilled foreign workers into the USA - by 20,000 to a total of 85,000 per year.

Among other aims, the bill would make it easier for spouses and children of H-1B holders to work in the US; would add a “market-based escalator” further increasing the number of visas available by 111,000 to meet market demand; and would remove country limits for the Green Card system (of particular interest to countries such as India and China with a large number of citizens currently caught in a backlog).

The bill, introduced by Senators Orrin Hatch and Jeff Flake, comes only days after the United States Citizenship & Immigration Service (USCIS) announced that it was not planning any changes to the visa regime which would result in visa holders being forced to leave the country; this statement was made following reports that President Trump was seeking to restructure the H-1B programme in a way which could see up to 750,000 workers being removed.

Tech industry analysts and executives have reacted warmly to the bill, with Dean Garfield, the CEO of the Information Technology Investment Council, saying that the bill helps “meet the needs of our economy, drive new investment, and bolster the tech industry’s commitment to growing the domestic workforce”.

The annual outsourcing industry pub quiz hosted by Aecus, a Hackett Group Company, took place earlier this week – raising well over £5,000 for charity.

Some 20 teams representing organisations from right across the outsourcing arena – including the GSA - gathered at The Vintry in London to show off their knowledge (or, in some cases, remarkable lack thereof) of, amongst much else, current affairs, musical cover versions, personalities in the news and London-centric nursery rhymes.

It was a big night for the outsourcing lawyers with eventual winners Bristows followed closely by Morrison & Foerster and Baker McKenzie in second and third respectively. The GSA team came a creditable sixth; meanwhile, bringing up the rear and seizing the coveted wooden spoon for 2018 was the team from ITC Infotech.

The £5,400 raised on the night via table sales and donations will go to Medecins Sans Frontieres and Vision Rescue, a charity helping street children in India.

Enterprise-level AI deployments are already “becoming pervasive” and the technology is disrupting the majority of industries, according to research unveiled by Indian outsourcing and IT giant Infosys at the World Economic Forum in Davos this week. Some 90% of C-level executives “have already reported measurable benefits from deploying AI” while nearly half (45%) say that “the AI deployments in their organisation are greatly outpacing the accuracy and productivity of comparable human activity”, according to the global survey of over a thousand C-suite executives and decision-makers.

The Infosys research shows that while AI for business is still considered to be at a very stage of maturity by many, in fact its adoption is already widespread and transformative, with 86% of organisations surveyed having either middle- or late-stage AI deployments. Meanwhile, most (77%) of those questioned were at least guardedly optimistic about the impact of the technology on their workforces, being “confident that employees in their organisation can be trained for the new job roles AI technologies will create”.

Infosys President Mohit Joshi said: “While it’s fair to say that, like most promising new technologies, there has been a tremendous amount of hype around AI, it turns out that the vast majority of enterprises with AI deployments are realising clear and measureable results. AI, as the research shows, is becoming core to business strategy, and is compelling business leaders to alter the way they hire, train and inspire teams, and the way they compete and foster innovation. Industry disruption from AI is no longer imminent, it is here. The organisations that embrace AI with a clearly defined strategy and use AI to amplify their workforce rather than replace it, will take the lead, and those that don’t will fall behind or find themselves irrelevant.”

At a time when a depressing array of significant geopolitical and economic challenges are casting shadows over many parts of the world - and when growing isolationism appears to be the order of the day within some of the world's traditional heavy hitters - cooperation between countries and between like-minded business-facing groups has taken on an added importance. It was extremely encouraging, therefore, to find at the 2nd Polish-Ukrainian Outsourcing Forum (held in Rzeszow, Poland, towards the end of last year) signs of very healthy cooperation and alignment between two of the CEE region's most prominent IT and business services players - each of which is currently in its own way struggling with some of those aforementioned challenges.

The one-day event (with a preliminary tour and dinner the previous day) attracted some 250 attendees - around half of whom represented Ukraine, ensuring that the show very much lived up to its title - and featured a well-considered selection of panel discussions and case studies examining the current status and future prospects of outsourcing in the two countries in question. While neither of the most prominent elephants in the room - the ongoing conflict in the eastern part of Ukraine, and Poland's current political uncertainty and apparent shift towards nationalism - were ignored by the panels, the tone was nevertheless one of pronounced optimism, with the successes to date of the outsourcing industry in both countries being both lauded and analysed, and prospects for future growth (and potential spanners in the works) placed under a variety of microscopes.

The conference had received solid backing from both public and private players in Rzeszow (the largest city in south-east Poland, with just under 200,000 inhabitants, less than 100km from the Ukrainian border) who see the benefits that outsourcing and business services companies have already brought to the area and keenly desire to grow that tasty pie and the size of Rzeszow's particular slice. While not at this stage in the same league scale-wise as the likes of Kraków, it's clear that the Rzeszow authorities are targeting this space with gusto - the retention of this event being indicative of their desire not merely to market the city but to learn from the experiences of their neighbours - and it was illuminating to hear from the Deputy Mayor and others about the steps being taken to ensure the continued development of a competitive, attractive offering.

Key to any such offering, of course, is talent, a topic which popped up time and again in both on-stage discussions and individual networking. Both Ukraine and Poland rose to outsourcing prominence thanks to the quality (and, of course, comparative affordability) of talent they have been able to supply, and the questions of how to grow, develop and, especially, retain that talent were eagerly addressed by attendees well aware that consistent success in this field is indispensable if a broader success (economic and social) is to be achieved. It was also reassuring to note that pretty much everyone questioned with regards to this topic appeared well aware of the importance of training new and existing talent not simply to meet the demands of today, but to be able to react to looming shifts in the nature of work in this space coming in the wake of, for example, process automation and AI-related technology. The generally optimistic air of the event was maintained as various speakers highlighted plans and structures within their respective organisations designed constantly to move employees up the value chain as technology claims the more repetitive, less stimulating tasks on the agenda.

This type of tech, of course, provides significant opportunities for both Poland and Ukraine thanks to the existence in each country of robust technology industries: a good proportion of Ukrainian attendees in particular came from the more software-oriented end of the space, where great joy has been found in recent years (indeed, one question providing food for thought was whether the country might be focussing too tightly upon software development and ITO more generally at the expense of possible gains in other subsets of the BPO multiverse). The region has traditionally been very strong in what we would now call STEM fields, and a key challenge now is to ensure that built onto those strengths are suitably enhanced capabilities in areas like marketing, negotiation and HR, in order that homegrown companies can thrive and compete against (frequently much bigger) foreign players. The nexus of trends such as AI, IoT and others is being felt and observed no less excitedly in Poland and Ukraine than elsewhere in the world, and it felt at this event that there is a genuine determination in some quarters that at the break of that wave these countries must not become mere talent pools for foreign companies, but must instead - or, rather, also - build their own powerhouses. The opinion was widespread in Rzeszow that success here will require - among much else, of course - a good deal more thought leadership and networking events such as this conference and others, along with elements such as industry standards and codes of conduct, more coherent and smarter communication with the rest of the global outsourcing community, and deeper links with and access to potential customers in traditional and new markets (all areas in which, not coincidentally, the GSA is doing a good deal of work in both countries).

In a world (business and more broadly) of finite resources and opportunities, two neighbouring countries striving for similar benefits from the same space are inevitably going to be, to a certain extent, competitors as well as potential collaborators, and the precise nature of any 'coopetition' (formal or otherwise) between Poland and Ukraine appears (at least as depicted at this event) still to be somewhat nebulous. One especially noteworthy issue is the currently more or less one-way traffic of talent from Ukraine into Poland: cities such as Rzeszow are clearly keen to attract good professionals from Ukraine, which is experiencing a steady outflow of talent (which one speaker in particular was very determined not to describe as a "brain drain") thanks in part to the country's eastern crisis, and despite the Ukrainian government's attractive tax incentives aimed at keeping said talent within its borders. A number of Ukrainian companies have reacted by setting up regional offices within Poland itself, to keep emigres at least partly within Ukraine's economic embrace if not its borders; how long the "if you can't beat 'em, join 'em" approach will last, and how successful it will prove, has yet to be determined, but in the absence of a prompt resolution to the country's current travails, making the best of a bad job with regards to this exodus seems the only sensible option for now.

Walking around the historic centre of Rzeszow, and speaking to some of the attendees from the locality, the cultural connections between (especially western) Ukraine and this part of Poland were impossible to ignore: the region of Galicia has much shared heritage and at various times during the last millennium has been a single polity (usually under the control of other, larger powers) and though national allegiances hold sway it's clear that there's a degree of trans-national kinship felt here which is unusual, to say the least, across much of modern Europe. While each country is resolute upon its own path, the convergence of interests on display at the 2nd Polish-Ukrainian Outsourcing Forum - and, crucially, the determination of the attendees to capitalise on such synergies - suggests that sustained collaboration and strategic alignment could well pay off in spades for those driving the industry forward and for those new cohorts seeking to make their collective way up the career path. It will be very interesting to see if that determination, and the refreshing positivity which characterised the conference, will be maintained going forward.

When contracting on construction projects, it’s imperative to have appropriate written agreements and programmes in place. Often, contracts give both parties the right to terminate if one or either becomes insolvent. That means you can walk away from a project without incurring any further costs but what should you do about the money you are owed for the work you have already completed?

That’s the shadow hanging over around 30,000 businesses collectively owed £1 billion following the collapse of Carillion which has left chains of first tier suppliers and subcontractors in limbo.

The scale of this insolvency is extraordinary but the same common sense responses to a customer in insolvency still apply.

Firstly, it’s worth getting a good sense of how exposed you are. Clearly, if your business depends for its survival on the next payment from Carillion, as is sadly the case for some, it will be your number one priority. However, if your exposure is far from critical, it would be a mistake to spend every working moment on the issue when you have other customers to look after and opportunities to pursue.

Having said that, you still need to take some action urgently.

You may have seen news about banks creating a fund for firms affected by the collapse and of a new government task force to address the issue but don’t take those as an excuse to do nothing and hope for the best. There are plenty of things you can do now to protect your business.

Step one is to look at where you have outstanding contracts and whether these are affected directly or indirectly with Carillion. This is a list of the companies in liquidation: Carillion plc, Carillion Construction Ltd, Carillion Services Ltd, Planned Maintenance Engineering Ltd, Carillion integrated Services Ltd and Carillion Services 2006 Ltd.

The liquidators, PwC, have set up a website for everyone affected. Go to https://www.pwc.co.uk/carillion and select ‘Suppliers’.

Check your contracts in both directions, firstly to see if you’re entitled to suspend or terminate your contract with your customer and secondly to see what your options are with anyone that you are sub contracting to. If you decide to take action under your contracts, make sure you do this within the terms of the contract.

Your contract with your customer may set out specifically what should happen if one of the parties in the supply chain becomes insolvent. Make sure you understand it and keep track of progress. If the contract doesn’t do this, take steps to retrieve the money owed to you, which may be through legal means or withholding future work on the project until you are paid.

Take steps to protect any physical property or supplies that you have not been paid for, making sure to do so within the law, of course.

am a strong advocate of effective programmes and record keeping to protect yourself in the event of disputes or situations that lead to potential non-payment such as your customer going into liquidation. If you don’t already have full written records of the work you have carried out on any projects affected by the liquidation of Carillion, prepare them now.

There is much in the media about lessons to be learnt from Carillion. For contractors, the affair should encourage a review, firstly of how they enter into contracts and secondly their effectiveness at managing programmes and record keeping because when things go wrong, these can be the difference between being paid or losing everything.

By Michael Gallucci, managing director, MPG.