Britain's Carillion collapses after banks pull the plug
16 January, 2018, 01:25 | Author: Katrina Soto
The opposition Labour Party questioned why May's government continued to award contracts to Carillion despite its profit warnings and questioned why Britain had handed over so much of its public service work to private companies.
Spun out of Tarmac almost 20 years ago and including such construction names as Wimpey and Alfred McAlpine, Carillion operates in Britain, Ireland, Canada, the Middle East and North Africa.
Ministers, top bankers and company bosses scrambled to find a way to save the company in last-ditch talks over the weekend.
By GCR Staff0 CommentsCustomers of failed United Kingdom firm Carillion have just been told to expect contracts to continue as before, while staff have been advised to show up for work as normal.
Thus, risk ripples across both the public and private sector to disastrous effect - in this case by bringing a major public infrastructure company to its knees and so inevitable pressure for the Government to intervene.
However, it remained possible that those lenders to the UK's second-biggest construction group could yet change their minds, according to some people close to it.
Concerns have also centred around the paying of pensions.
Construction and engineering giant Carillion has collapsed after last-ditch talks with lenders and the government failed.
The Government moved quickly to assuage fears for those involved in frontline public sector service contracts, with Minister for the Cabinet Office David Lidington telling staff to report for work today, confirming that they would be paid by the Government through the receiver in the short-term before services are taken on by other contractors.
The construction group, which counted the HS2 high-speed rail link and hundreds of schools, hospitals and prisons among the public sector work it was contracted for, had seen mounting losses in recent months after mispricing a series of projects.
It looks after 50,000 homes for the Ministry of Defence and is one of the main suppliers of maintenance services to Network Rail. "I'd also like to thank staff for continuing to do a great job during a period of uncertainty and to reassure them that the county council will ensure staff are paid".
Ministers said the plans included the Aberdeen Western Peripheral Road (AWPR), which is being built by a consortium which includes Carillion.
Jim Kennedy, the Unite union's national officer for local government, said a public inquiry was needed to answer questions about Carillion's conduct and the Government's decision to award it contracts.
The company said despite considerable efforts, discussions to secure funding have not been successful and has therefore decided to make an application to the High Court for a compulsory liquidation of the business. Managers will assume day-to-day control of the company, selling assets, dealing with creditors' claims and investigating what caused the company's collapse.
In one of the biggest British corporate failures in recent years, Carillion went into compulsory liquidation after costly contract delays and a slump in new business left it swamped by debt and pensions liabilities of around 1.5 billion pounds ($2.1 billion).
Carillion's shares prices have plunged more than 70% in the past six months after making a string of profit warnings and breaching its financial covenants.
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Richard Howson quit as chief executive at the time of the profit warning after five years in the role.
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