BUSINESS experts have warned that the “domino effect” of the liquidation of outsourcing giant Carillion could see further insolvencies in the months ahead.

French Duncan said many firms many not be paid for goods and services supplied to Carillion, resulting in financial difficulties in the next three to six months – which could see some of them becoming insolvent.

The firm said Carillion’s standard payment terms to suppliers were 120 days, which means many creditor firms will be due substantial amounts from September 2017 onwards.

It is not known if any dividend will be paid from the liquidation or how much it might be, which could cause considerable difficulties for many of the 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 January 15, 2018.”

French Duncan said that while this indicates there will be work for these companies in the near future, there is no mention of funds due prior to January 15, 2018, which could cause a 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, 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.”

Figures from the Accountant in Bankruptcy (AiB), meanwhile, showed the number of Scottish companies going out of business also continued to fall, with total corporate insolvencies down by 3.8 per cent compared to the same quarter a year ago – dropping from 210 to 202 .

There were also fewer personal insolvencies – 1089 compared to 1137, a drop of 4.2 per cent.

Business Minister Paul Wheelhouse said: “The longer-term trend for bankruptcy is very much a downward one and it is heartening to see this reflected in these recent figures.

“There is absolutely no doubt in my mind the UK Government’s persistence with its failed policy of austerity is causing real hardship and strain for financially vulnerable families all across Scotland.

“They face even more challenges once the impact of the UK Government’s reckless determination to pursue an economically damaging Brexit becomes known.

“The shadow of Brexit looms over businesses the length and breadth of Scotland and it is clear this issue is having a negative impact on both growth and investment by our companies.”