Tens of thousands of small firms may get less than a penny back for each pound they are owed by Carillion.
The collapse of the construction giant leaves up to 30,000 traders facing combined losses running to hundreds of millions of pounds.
Contractors and suppliers undertake almost £1billion of work for the firm each year. They are now at risk of having to slash staff or going under.

Philip Green (left) has been chairman of Carillion since May 2014 while former chief executive Richard Howson (right) was getting paid a £660,000 salary until October, even though he quit in September

Carillion, which was Britain’s second biggest construction firm, went into liquidation on Monday after running up losses on contracts and huge debts
A report by accountants before Carillion went bust showed that creditors would get between 0.8p and 6.6p in the pound if it went in to liquidation.
It has just £29million in the bank – having paid out £458million in dividends to shareholders between 2011 and 2016.
Its directors – past and present – are to investigated by the Official Receiver.
Many sub-contractors would be owed money going back months, according to Mike Cherry of the Federation of Small Businesses.
He said: ‘It is vital that Carillion’s small business suppliers are paid what they are owed, or some of those firms could themselves be put in jeopardy, putting even more jobs at risk besides those of Carillion’s own employees.’
As the fallout intensified over Britain’s largest corporate failure since the financial crash:
Ministers ordered a fast-track investigation into the company’s directors;
They said staff working on public sector contracts would continue to be paid;
State-backed Royal Bank of Scotland was accused of undermining Carillion’s attempts to avoid collapse;
Jeremy Corbyn said the firm’s directors should pay back their bonuses;
It emerged that Carillion went bust carrying up to £3billion of financial liabilities.
Carillion, which was Britain’s second biggest construction firm, went into liquidation on Monday after running up losses on contracts and huge debts.
Its business is in the hands of the Official Receiver, which is reviewing all of its contracts.
Yesterday the sites of major multi-million-pound developments in Manchester, Birmingham, London and Sunderland were deserted. And it appears that work on the Royal Liverpool Hospital could also be delayed.
Business Secretary Greg Clark yesterday demanded the probe be broadened and fast-tracked. The conduct of current and former directors will be examined.

Two people in high-visibility jackets next to the S2 building, a Carillion construction project in King’s Cross, London

A foreman at the Angel Gardens development in Manchester(pictured yesterday) said that all the sub-contractors employed at the site had packed up their tools yesterday and left
It also emerged that taxpayer-backed Royal Bank of Scotland tightened the terms of its funding to Carillion three days before it was forced to call in liquidators. In a witness statement filed in the High Court, Carillion’s interim chief executive Keith Cochrane accused the lender of taking ‘unilateral action which in the company’s view undermined the group’s efforts to conserve cash’.
On Saturday, it submitted a final plea to ministers for funding, but the next day the request was refused in favour of liquidation.
Mr Cochrane’s statement revealed the firm has debts and liabilities of £3billion – including a £587million pension deficit.
Carillion employed 43,000 people worldwide, including almost 20,000 in the UK, and had 450 contracts with the Government. Ministers said staff and contractors working on public sector service contracts would continue to be paid. But there was no such guarantee for firms tied into private work. The Pension Protection Fund is expected to take on Carillion’s pensions deficit.
The firm spent £952million with small firms in 2016 and ministers said companies working on the firm’s private contracts would be paid for another 48 hours. But some are already losing out – and laying off staff. Mr Cherry said unpaid bills could go back several months, with some suppliers saying they waited 120 days to be paid.
‘Sadly these kind of poor payment practices are all too common among some big corporations,’ he said. ‘When the dust settles on this sorry saga, there is also a wider lesson to learn about the concentration of public contracts in the hands of a small number of very big businesses.
‘Public procurement must be much more small-business friendly, in which it is easier for small firms to navigate the system and the Government should prioritise meeting its target of at least one third of taxpayer-funded contracts going to smaller firms.’
Sarah McCann-Bartlett, of the British Constructional Steelwork Association, said thousands of sub-contractors would be out of pocket. ‘There is always a long trail of sub-contractors that go under in these situations,’ she added. ‘A lot were working for Carillion and were not insured, and so that’s devastating.’
Labour leader Mr Corbyn said: ‘When there are people who are sub-contractors or small firms that are contracted into Carillion that are not getting paid, workers being made redundant at 48 hours’ notice, and less in some cases, the directors, for all the bonuses they have had, should pay them back.’
Labour peer Lord Adonis said a senior government official had told him the Government might be hit for £600million ‘paying through the nose for new private contractors to take on the work’.