Contractors lose out in Concept Telecom collapse

Risky business

Several IT contractors have been left high and dry by the collapse into receivership of mobile phone testing and contracting services outfit Concept Telecom.

Following on from our story about an ad soliciting buyers for Concept Telecom in last week's FT, a number of contractors in the pay of the company have contacted us to explain their plight.

Nottingham-based Concept turns over £5m a year, according to the FT ad, of which £3.5m comes from contracting out engineers to telecoms clients and £1.5m comes from the company's mobile phone testing division.

As a result on Concept's slide into receivership, around 20 to 30 contractors are unlikely to receive payment in full for work carried out in February and March.

Receivers Tenon Recovery have not returned any of our repeated requests for comment, but we understand that it is telling contractors to submit their February timesheets. Receivers are telling contractors that they could receive 60 per cent of any money due.

So much? Was it really necessary to place the business into adminstrative receivership in the first place? For a potential buyer, the issue diminishes the value of the contracting services portion of Concept's business. After all what is the value of a bust recruitment company with no contracts?

Although the people who work directly for Concept might lose their jobs, contractors are in a worse position financially.

Under UK liquidation laws, staff the taxman and secured creditors (such as banks) are in a preferential position when firms are broken up. Contractors are treated as ordinary creditors and are far less likely to receive any money, two lawyers we contacted for legal background tell us.

Concept Telecom illustrates the greater risk that contractors take when the company they work for gets into financial difficulty.

As one of the affected contractors tells us: "Contractors losing out due to an agency going into receivership is something that is obviously very unpleasant. It's another unnecessary risk for the contractor, however something most contractors have not even heard of happening." ®

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