Contractors have been warned they must ensure due diligence is completed on all their service providers, following the liquidation of two umbrella firms.

Chief executive officer Dave Chaplin of website Contractor Calculator said that the closure of Sunday Solutions and Bradbury & Co demonstrates the importance of a background check on service providers before they sign up.

Mr Chaplin advises contractors to use the website's Umbrella Checklist to vet potential service providers.

"Contractors can avoid being left to pick up the bill when providers either go into liquidation due to cashflow or other management issues, or when less scrupulous firms charge excessive fees, provide poor service and then flee their responsibilities," he said.

This comes after five umbrella companies were reprimanded by the REC for being anti-competitive.

REC issued a public statement against the five businesses: Anders Elite, Eden Brown Ltd, Fusion People Ltd, Henry Recruitment Ltd and Randstad CPE.