When the Client Goes Bust: The Hidden Cost of a Section 114

When a private company goes under, it’s disruptive. But when a local authority issues a Section 114 notice, effectively declaring itself bankrupt, the consequences go much further. For those of us managing contracts with these organisations, the impact isn’t just professional; it’s personal. As a contract manager in the reactive maintenance sector, I’ve experienced first-hand what happens when a council, our client, can no longer meet its financial obligations. It’s not just numbers on a spreadsheet. It’s real people, real livelihoods, and, often, public safety at stake.

The moment that notice lands, everything changes. All non-essential spending stops. Contracts, even long-standing, essential ones, enter limbo. Payments are delayed, communication slows, and decisions are put on hold. For us, it meant pressing on with critical repairs, unsure if we’d be paid or for how long we could sustain the work. The uncertainty hit hard. We had to lean into open, honest conversations with staff and suppliers alike. Emotions ran high, and rightly so. It’s in moments like these that the difference between leadership and management becomes painfully clear.

Yes, the financial impact matters. But it’s the human cost that lingers. I found myself fielding difficult questions from subcontractors, trying to reassure our own people, and navigating tense conversations with finance teams, all while morale teetered. Spreadsheets only take you so far; it’s the resilience, loyalty, and spirit of your team that gets you through.

Public sector contracts are usually full of detail, but rarely include a roadmap for when the client itself goes bust. Do we stop? Scale down? Keep going out of principle? The legal and ethical ambiguity is exhausting. Yet what stood out during that period was my team’s integrity. I joined this company because of that quality, and in the toughest of times, it showed. We kept turning up. We did the right thing, even when it hurt.

There are lessons here: the importance of risk planning, the need for transparency, and the strength that comes from unity. But even the best preparation doesn’t shield you from the uncertainty a Section 114 throws at you. Contract management in this kind of crisis demands more than just competence, it demands grit, empathy, and endurance.

This has been one of the most challenging times of my career. But it’s also been a powerful reminder of the value of what we do, often invisible but absolutely vital to the people who rely on us.

If the organisation paying your invoice suddenly couldn’t, what would you do?