Building resilience into construction payments: Lessons from Carillion and ISG

When trust becomes a structural weakness

The collapse of Carillion in 2018 was more than the downfall of a major contractor - it exposed a systemic failure in how construction finance was structured. With over £7 billion in outstanding liabilities and tens of thousands of unpaid subcontractors, work on hospitals, schools & critical infrastructure stopped overnight.

This situation threw an overdue spotlight on a fragile financial ecosystem, one built on deferred payments, blurred ownership of client funds, and a culture of pay when paid. ISG, Dawnus, and others followed similar patterns: rapid growth, thin margins, and capital locked in complex project chains. 

When pressure hit, the weakest link broke first, and the ripple effect spread through the entire supply chain. Only by analysing the full extent of the systemic failures can lessons be learned for the future.

The unseen risk: how money moves in construction

Construction is renowned for slow payment schedules with funds being funnelled through opaque, multi-tiered systems.

By the time a subcontractor is due to receive their cash, the money may have been:

• Redirected to cover unrelated project costs.

• Delayed due to disputes or administrative backlogs.

• Trapped in insolvency when a main contractor fails.

For decades, this has been the agreed way construction financing works. However, the advancement in digital escrow services shows us that a different future is possible.

What if the money had been ringfenced?

In the traditional model, client funds often end up sitting in the contractor’s general operating account, exposed to their wider corporate risk. In an escrow model, those very same funds are held in a dedicated, FCA-regulated account, ring-fenced from day-to-day trading activity and inaccessible to the contractor or its creditors in the event of insolvency.

When Carillion plc collapsed, it owed around £2 billion to its suppliers, subcontractors and unsecured creditors who stood to recover almost nothing. If client or project-specific funds had been segregated rather than consolidated, the risk of total financial wipeout to the supply chain would have been mitigated.

Had funds been placed in dedicated escrow structures, subcontractors might have seen payments honoured even as the parent contractor failed, meaning fewer collapsed trades and continued operations.

Legal clarity – would it have given people a clearer place to turn?

Contracts are supposed to allocate responsibility, yet in practice, they often leave parties guessing about who controls funds, who certifies work and when payment must be made.

Clear legal frameworks that confirm the terms of fund release, escalation and insolvency contingency give stakeholders a firmer basis for intervention or claim. In other words, when everybody knows “who does what when,” the route to accountability is more visible.

Trust could have been rebuilt or maintained

Trust in the built environment is fragile. When payments are late, funds get misapplied or parties behave opportunistically, the ripple effect in the supply chain can be catastrophic. Carillion’s collapse triggered a -20% spike in construction firm insolvencies in the UK in Q1 2018.  

Restoring trust isn’t just about promise-keeping - it's about designing frameworks where the flow of funds and legal accountability work in tandem. When payments are predictable, transparent and enforceable, then trust becomes embedded and normalised in the system.

Lessons for the future: A blueprint for change

The post-Carillion era has forced the industry to rethink procurement, payment security, and financial ethics. Policy reforms have been debated, and retention laws have been challenged. But progress has been slow because systemic change needs both trust and technology. Escrow brings both.

If escrow is the answer, why hasn’t it happened yet?

Historically, escrow has been seen as slow, costly and legally complex. At Interpolitan Money, we combine decades of industry experience with the latest in capital restructuring technology to offer escrow accounts built for the needs of modern construction.

• For developers, it means accountability without friction.

• For contractors and subcontractors, payment certainty.

• For the industry, a foundation that can’t collapse under financial pressure.

No barriers. No bureaucracy. Just secure, structured, transparent finance for a sector that desperately needs it.

Reengineering trust in the build environment

While Carillion’s collapse was complex and multifaceted, it exposed weaknesses that still exist in how construction funds move and are managed. Escrow and other ring-fencing mechanisms can’t rewrite history, but they can help prevent the same vulnerabilities from reappearing.

With escrow-backed project accounts, we can build a resilient, transparent, and fairer construction ecosystem, one where trust isn’t assumed, it’s engineered.

Open an online project based account today

Interpolitan Money provides accessible, compliant escrow, TPMA and multi-currency IBAN accounts tailored for the construction and engineering industry. We partner every client with a hand-picked sector payment specialist who provides personalised service for your business. 

With your escrow account, you also receive:

• 50+ currency wallets with live rates & forward contracts

• Access to payment rails in 160+ countries

• Legal document drafting

• Holding accounts safeguarded by Tier-1 banking partners

Book a call with our dedicated London-based escrow team to discover how we can help protect, guarantee and elevate your cross-border payments.