British born business Carillion is heading into liquidation after banks lost faith in the company, forcing the government to mull a bailout.
Carillion collapsed on Monday after banks rejected a short-term loan in excess of £300m to continue the major construction contracts the company is currently carrying out, including the development of the UK’s newest high-speed rail service.
A total of 450 projects have been awarded to Carillion, including defence sites and HS2, but now PM Theresa May has another job on her hands to ensure the completion of these projects.
The government has now said it will step in after the company entered liquidation thanks to numerous contract delays and little new business.
“This is a very sad day for Carillion, for our colleagues, suppliers and customers that we have been proud to serve over many years,” Chairman Philip Green said. “In recent days 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.”
Carillion carries debt and liabilities totalling £1.5bn, with Shadow Business Secretary Rebecca Long-Bailey questioning as to why the Government granted the contracts to the construction company, despite repeated profit warnings.
“This company issued three profit warnings in the last six months yet despite those profit warnings the government continued to award government contracts to this company,” she told the BBC. “We expect the Government to bring all public sector contracts back in-house to provide a seamless delivery of public services going forward.”
The prospect of projects being uncompleted and delayed is just one of the big worries heading Carillion’s way as the company employs 43,000 people, including 20,000 in Britain alone, bringing concern to the future of their jobs.
Despite the concerns by some Government members over the profit warnings in the past and funding for projects going forward, Cabinet Office Minister David Lidington has said taxpayers will not be responsible for continuing projects and that workers need not worry about being paid.
“It is regrettable that Carillion has not been able to find suitable financing options with its lenders but taxpayers cannot be expected to bail out a private sector company,” Lidington said.
“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. We understand that some members of the public will be concerned by recent news reports. For clarity – all employees should keep coming to work; you will continue to get paid.”
Other ministers agree that the contracts must be brought back in-house for the government to solve the problem and ensure major projects such as the HS2 or hospital developments are still completed for the public benefit.
Jon Trickett, shadow minister for the Cabinet Office, said: “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.”
It was in July last year that Carillion won the HS2 contract, leading the consortium of firms included. The HS2 aims to better connect London with the North of England so is of priority to ensure the project is carried out.
Some of the projects Carillion has on the go will be taken on by other firms, with others being taken back in-house to the government.