HS2

15.01.18

Key HS2 contractor Carillion goes into liquidation

One of the government’s most important contractors, Carillion, has fallen into liquidation after emergency talks collapsed.

The construction giant is Network Rail’s second biggest maintenance service supplier and is also heavily involved in the HS2 project.

Despite government involvement, Carillion was not able to come to an agreement with investors to provide short term financial support and enable it to continue trading.

Philip Green, the company’s chairman, said: “This is a very sad day for Carillion, for our colleagues, suppliers and customers that we have been proud to serve over many years.

“Over recent months huge efforts have been made to restructure Carillion to deliver its sustainable future and the board is very grateful for the huge efforts made by Keith Cochrane, our executive team and many others who have worked tirelessly over this period.

“In recent days however, we have been unable to secure the funding to support our business plan and it is therefore with the deepest regret that we have arrived at this decision.”

The government will be stepping in to fund the services currently carried out by Carillion, although it is unclear at this time what the effect will be on many infrastructure and construction projects.

Labour’s shadow minister for the cabinet office, Jon Trickett, criticised the government for continuing to offer a reported £2bn of contracts to the firm in spite of profit warnings being given.

“The government must act quickly to bring these public-sector contracts back in-house to protect public services and ensure employees, supply chain companies, taxpayers and pension fund members are protected,” he argued.

“It is vital that shareholders and creditors are not allowed to walk away with the rewards from profitable contracts while the taxpayer bails out loss-making parts of the business.”

The government confirmed that all former members of staff at Carillion who receive pensions will still receive payments, and a helpline has been set up for workers who may be concerned.

The company currently employs around 20,000 people in the UK alone, with another 23,000 members of staff involved in its worldwide business interests.

A spokesperson for HS2 said the work which Carillion was involved in was part of a joint venture with two other companies who would pick up the slack.

“Today’s news about Carillion is clearly disappointing for them and the wider UK construction industry," they said.

“The CEK joint venture has provided HS2 Ltd with assurances that in the event any member of the group being unable to deliver on its responsibilities, the remaining members, now Eiffage and Kier, would fill the gap. HS2 Ltd does not hold a direct contract with Carillion.

“We are continuing to discuss with Kier and Eiffage the implementation of contingency plans. Work will continue as planned with no unnecessary or additional exposure to the taxpayer.”

Taxpayers ‘cannot be expected to bail out’ a private sector company

Cabinet office minister, David Lidington, said taxpayers “cannot be expected to bail out a private sector company.”

“Since profit warnings were first issued in July, the government has been closely monitoring the situation and has been in constructive discussion with Carillion while it sought to refinance its business.

“We remained hopeful that a solution could be found while putting robust contingency plans in place to prepare for every eventuality. It is of course disappointing that Carillion has become insolvent, but our primary responsibility has always been to keep our essential public services running safely.”

Carillion was in receipt of rail contracts from the government as recently as November of last year, when two sets of work were awarded to the company which were expected to generate more than £300m over the next three years.

Fears that the international construction firm could be in financial difficulty were confirmed earlier this month, when it was revealed that the Financial Conduct Authority (FCA) was conducting an investigation of Carillion.

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Comments

Roger Capel, Sheffield & Glossop   15/01/2018 at 10:09

Having worked alongside Carrillion on Nottingham Tram phase 1 as long ago as 2001 - 2, I'm just surprised that the crisis took so long to explode. 54 condemned pole foundations, rail fastenings cast into concrete being jackhammered out again---. That's just the star, I drank out on tales of Carrillion on NET1 for years. And which agency did they use for front line labour? Sky Blue, owned by ---- Carrillion!!

Jimbo   15/01/2018 at 10:47

@Roger Capel - From my own experiences and from tales from friends, that sort of thing is endemic across the rail industry starting with Network Rail. The use of contract labour may reduce costs, but there is a systemic problem with control & management which never used to be there, which results in too many failures. I am convinced this is the primary cause of rail construction costs to rise so dramatically. You would think that at least one of the construction companies could sort it out, but they are all guilty of poor results. This means Carillion may not be the last casualty.

Peter   15/01/2018 at 13:54

Labour’s position on this is ideological bluster – why would the government have stopped offering contracts to Carillion when it was issuing profit warnings? Lots of companies issue warnings, it doesn’t necessarily mean they’re going to collapse.

Jimbo   15/01/2018 at 17:18

Labour's position is to criticise the government at any and all opportunities it can, even when they would have done exactly the same thing. Continuing to give Carillion contracts could have saved them and saved all the jobs, but unfortunately it appears it was not enough. What would Labour have done to save the jobs? Probably give them even more contracts !!

Frankh   15/01/2018 at 20:04

Carillion went straight into liquidation because it had very few assets worth buying/borrowing against. A £580 million pension fund shortage and a share price drop from £1 billion to £61 million in the last 12 months a £1.15 billion half yearly loss in 2017 didn't give it a chance.

Philip Neil Spencer   16/01/2018 at 14:54

Some of those coments about contract labour are bang on,being ex British rail and jarvis rail fitter,I'd been out of the industry for a number of years after jarvis had gone,I came back in recently,and couldn't believe the amount of different companies working on the network,I believe bringing it back under public ownership is the best plan,and get rid of all these so called rail companies,I'v talked to a few ex British rail employees and they all agree the same,evan jarvis had it right,employ jarvis employees,and contract out if needed.

Mikeb   16/01/2018 at 14:58

Carillion were also principal contractors for the North West electrification, having taken over from Balfour Beatty. They were working on the Manchester to Preston line via Bolton, so heaven knows when that scheme will now be complete.

Ampox   16/01/2018 at 15:12

Always know your contractor and it's limitations and problems. A supplier of corrosion inhibitor for a refinery won't be able to pay if the refinery goes off line due to corrosion. CEGB (remember them?) always ran small projects in parallel with new reactor types, to be able to know the relevant issues. It's clear that govt departments don't know enough about their contractors' abilities, both technical and financial.

Roger Capel, Sheffield & Glossop   16/01/2018 at 15:32

Mikeb, I see that the Manchester Evening News is asking the same question. They're also involved with the blighted Sheffield - Rotherham - Parkgate TramTrain. Looking at it from the train between Rotherham Central & Parkgate & from the X1 bus at Tinsley, one can only hope that it's too near completion for Monday's events to make much difference.

Ben   16/01/2018 at 17:05

I worked alongside Carillion for some of the most recent phase of Thameslink, specifically Canal Tunnels, Cricklewood, Peterborough and various rail renewal sites. I found them spot on to deal with; no commissioning weekend missed, great attitude to safety, and no big killer punches when it came to final accounts. It wasn't the rail jobs that killed them; when Balfour Beatty tried to buy them a few years back, they uncovered some big old liabilities that they didn't like - hence they backed away from the purchase. This started the chain of events that led to their ultimate demise.

Melvyn   16/01/2018 at 18:30

While comments so far cover Carillion rail works the real surprises came when we heard how many pies they have their fingers in for besides rail and road it seems they also ran prisons, libraries and even School dinner services ! The anti HS2 lobby have tried to make capital of thus but fortunately the contracts Carillion were involved in were joint ventures designed for if any one of in one case 3 companies failed . And anyway HS2 is still at such an early stage that if a contract had to be re-let that could be done given HS2 is currently at demolition and site clearance and utility diversions stage ! This does raise serious questions re whether work especially providing services would be better if we went back to old days of Councils directly running services and even Network Rail building up its own workforce to cover long term maintenance of the network.

Neil   17/01/2018 at 08:33

I have to laugh at the ex British Rail employees who seem to believe things were better in their day. 50% of the time sat in the pub,the other 50 asleep in the van,then fighting early retirement at network rail to take the last drops from the well. Good on you BR lads.

Lee   17/01/2018 at 08:41

Mikeb 16/01/2018 at 14:58 Carillion were also principal contractors for the North West electrification, having taken over from Balfour Beatty. They were working on the Manchester to Preston line via Bolton, so heaven knows when that scheme will now be complete. Fortunately most of the route now has support stanchions in place, though none seem to have been erected in any of the stations other than Moses Gate and Salford Crescent. Carillion workers have been asked to report for work, so are presumably still being paid, though the works seem to be very protracted and incredibly slow-moving. I assume an alternate tenderer was identified when Carillion was appointed to take over the works from Balfour Beatty, though like you, I do hope we don't get yet another delay to the first NW electrification scheme approved by central government!

Bubbledog   18/01/2018 at 10:14

Neil @ 17/01/2018 at 08:33 Too true Neil! I worked for British Rail & then Railtrack and standards of safety, investment & productivity were laughable compared to what I see from the companies delivering the work today. Rose tinted glasses indeed

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