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.
Have you got a story to tell? Would you like to become an RTM columnist? If so, click here.