Carillion enters into liquidation putting thousands of jobs at risk
AILING construction firm Carillion said it had "no choice" but to enter into liquidation this morning, putting thousands of jobs at risk.
The building and maintenance giant is Britain's second largest and employs 20,000 in the UK alone - many at its Wolverhampton HQ.
The Government this morning urged the embattled firm's employees to go to work and added "those already receiving their pensions will continue to receive payment”.
As many as 43,000 jobs around the world could be affected by the collapse of the company - which is heavily-involved in the HS2 rail project as part of a £6.6bn contract.
Carillion also helped build and maintain Heathrow's new Terminal Five and is responsible for maintaining 200 NHS operating theatres across the country.
But a statement from the company today confirmed it had been brought to its knees amid a £900million debt mountain and £590million pension shortfall - and the Government have refused to bail it out.
Collapse of Carillion: What we know
- Britain's second-largest construction firm Carillion this morning entered into liquidation
- Up to 20,000 British jobs are now at risk - with a further 23,000 around the globe threatened
- The firm issued three profit warnings and has breached a string of financial agreements
- Carillion is estimated to have public sector contracts worth £1.7bn
- The Government has assured that services provided by Carillion - including the running of schools and prisons - will be maintained
- Ministers will hold an emergency Cobra meeting this evening to discuss the urgent situation
- Carillion was awarded part of a £6.6bn contract to help construct HS2
- The firm helps to build, maintain and manage 200 NHS operating theatres as well as provide 32,000 school meals every day
- It maintains 50,000 army base homes for the Ministry of Defence
- And a Labour-controlled council was set to award the crisis-hit firm a £14million road-building contract just SEVEN days ago
- Among Carillion's former projects are the Channel Tunnel, Royal Opera House, Tate Modern, GCHQ's doughnut HQ and the Library of Birmingham.
- It completed a revamp of Edinburgh's Waverley Station just 13 days ago
- Small firms have been waiting for Carillion to pay them bills for months
- The business's share price has plunged by 70 per cent in the last six months - and today they were suspended
- Carillion met with lenders HSBC, Barclays, Santander and Royal Bank of Scotland last week to discuss its debts - but banks are thought to lost around £2billion as a result of today's news
- The Financial Conduct Authority are investigating announcements made by the firm last year
- Fuel cards issued to Carillion workers were rejected at petrol stations this morning, the RMT revealed
Chairman Philip Green added: "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.
"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."
Last-ditch talks between the firm, lenders and the Government over the weekend failed to come to an arrangement.
Sources told the Press Association that Carillion had asked ministers for £20million in emergency funding to avoid going into liquidation.
The Cabinet Office declined to comment on the speculation.
Today's announcement provoked fury from unions who blasted the Government for the "disastrous collapse".
RMT chief Mick Cash said: "This is disastrous news for the workforFce and disastrous news for transport and public services in Britain.
"We have been warning since Thursday night that we thought the collapse of the company was imminent.
"The blame for this lies squarely with the Government who are obsessed with out-sourcing key works to these high risk, private enterprises."
Carillion's collapse is bad news for our pensions, expert warns
THE liquidation of the contractor Carillion should “trigger alarm bells” for pension savers across the UK, a leading financial consultant has warned.
The Pension Protection Fund (PPF) are stepping in to look after multiple schemes of the firm’s current and former staff - which have 28,500 members.
It is estimated they have a £580million deficit - which could balloon to £800million - putting pressure on the PPF – the Government-backed scheme which protects funds if companies collapse.
And Nigel Green, chief exec of deVere Group said: “Whilst the PPF is an important and valuable support, UK final-salary pension schemes have an enormous deficit blackhole, which raises the inevitable question, ‘how many more big hits can the PPF take?’”
He added: “This deeply depressing, and now all-too-frequent, turn of events should be a wake-up call to pension savers."
But Steve Webb, the former pensions minister in the coalition, said the Carillion liquidation will not threaten the pensions ‘lifeboat’, the PPF.
Mr Webb, now director of policy at Royal London, said: “Although there is a big shortfall across the Carillion pension schemes, the PPF is financially strong and will be able to pay out pensions in line with its normal rules."
The collapse could also see workers' lifetime payours reduced by around 15 per cent, pensions consultant John Ralfe said.
The collapse raised fears last night that public services provided by the group - including the provision of school meals to nearly 32,000 pupils every day - could be affected.
Green this morning insisted the Government would step in to ensure public services were left unaffected.
He added: "We understand that HM Government will be providing the necessary funding required by the Official Receiver to maintain the public services carried on by Carillion staff, subcontractors and suppliers."
Ministers are facing mounting questions about why they decided to hand over more contracts to the failing firm last year - including a £1.4billion contract to work on HS2 that was given just after they issued a profit warning and the CEO had departed.
An after its second profit warning in November, the firm was awarded a £62million contract with Network Rail to upgrade the London to Corby track - and a 50 per cent stake in a £260million contract for the electrification of the route.
Contingency plans were already being drawn up at this time, ministers confirmed.
Cabinet Officer David Lidington told MPs in the House of Commons today that he was "disappointed" at the failure of the company and it was "regrettable" that it had come to this.
But he insisted that "taxpayers should not and will not bail out a private sector company for losses, or allow rewards for failure."
A helpline for worried employees has been set up, and an investigation will look into whether the directors caused any damage to the company in the months leading up to its collapse.
Those working on the public contracts will continue to be paid, but the fate of private sector employees will be decided in the next 48 hours.
But Lord Adonis, the Labour Peer who quit the National Infrastructure Commission last month, said the Government had "questions to answer" about whether it propped up the firm.
The Government failed to appoint a key intermediary to manage its relationship with Carillion for three months at the end of the last year too.
John O’Connell, chief executive at the TaxPayers’ Alliance, said that “despite the extremely well-publicised financial difficulties Carillion has been experiencing in recent months, the government continued to award it contracts, disregarding its own risk-management policies in the process”.
No10 demands answers over why ex-Carillion boss was able to get £600k payout last year
DOWNING STREET today demanded answers over a staggering £660,000 pay-off for the former boss of Carillion as it sparked chaos in Government by collapsing into administration.
The PM’s official spokesman said Carillion’s board would have to explain why ex-chief exec Richard Howson was handed the bonus when leaving after a huge profit warning last autumn, Steve Hawkes writes.
He said: "Carillion will need to explain why they took this decision we will not expect to see people benefit from this failure".
He ran the embattled firm from 2012 until last July when he quit.
Unite said: "This is a classic case of rewards for failure. The people are the top of Carillion were apparently lining their pockets."
Other staff members who left last year will also get hefty payouts.
Zafar Khan, the former Chief Financial Officier, who stepped down in September, will get his £425,000 salary, and Keith Cochrane, who will leave next month after standing in as interim CEO, will be paid £750,000.
It came as No.10 revealed the Government had a whopping 450 contracts with Carillion – one of the biggest outsourcing companies in the UK.
And the PM’s official spokesman was forced to defend Transport Secretary Chris Grayling’s decision to hand Carillion a valuable HS2 deal after its profit warnings revealed the extent of the difficulties the company was facing.
"The normal tender procedures were followed," the PM’s spokesman said, and promised that "if there are lessons that can be learned" from the collapse, "they will be".
Labour peer Lord Adonis today warned the taxpayer could be left with a bill of "tens of millions" because the Government has been forced to step in and guarantee the running of the public service contracts.
Labour’s Meg Hillier, head of the cross-party Public Accounts Committee, said: "Government now faces a stark choice: bail Carillion out or let public services and projects suffer. Either way, taxpayers will get a raw deal."
Jon Trcikett said that payments to Mr Howson were "unacceptable" and the collapse raised serious issues about the competency of the Government and Mr Grayling.
She added: "Government has serious questions to answer about its role in allowing taxpayers’ exposure to escalate to this point."
The firm has debts of £900million but its bank backers will not provide new funding without support from Government.
Its pension scheme also has a £580million deficit. Funds for thousands of current anf former staff will now be managed by the Pension Protection Fund.
Last night accountancy firm EY was put on standby to step in if the firm went under.
A collapse would be disastrous for workers and those in its schemes, which also include defence, prisons and rail.
This morning the infrastructure giant Balfour Betty said it could take a hit of up to £45million due to a joint venture to take on three projects with Carillion.
What happens to Carillion's £1.4bn HS2 contract now?
THE collapse of contractor Carillion will not lead to public services failing to be delivered, the Cabinet office minister has claimed.
David Lidington announced the government will provide the necessary funding required by the Official Receiver to make sure thousands of staff can keep going to work this week, writes Alain Tolhurst.
And he said many of the projects which have been awarded to the now-liquidised firm will be fulfilled by the partners in the scheme.
For example the £1.4billion tender for the HS2 rail project signed in July – after Carillion had already issued a profit warning – was a joint venture with two other companies; Eiffage and Kier.
Mr Lidington told the BBC that in this scenario and others the share of the contract will be taken up by the partner contractors, and should not be affected by today's news.
And in the short term he said current contracts to provide day-to-day services will be fulfilled through the appointed receiver, using the money which was already set aside to pay to Carillion for them.
He also confirmed today that some services would be taken "in house" while others will be handed to other operators.
But the company will not be bailed out, he stressed.
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