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| Carillion: Government contractor enters compulsory liquidation 'with immediate effect' | Carillion: Government contractor enters compulsory liquidation 'with immediate effect' |
| (35 minutes later) | |
| One of the Government's most important contractors has collapsed into liquidation as a result of its lenders refusing to provide any more financial support, raising fears about the future of hundreds of major projects at an already challenging time for the British economy. | One of the Government's most important contractors has collapsed into liquidation as a result of its lenders refusing to provide any more financial support, raising fears about the future of hundreds of major projects at an already challenging time for the British economy. |
| Following several days of tense negotiations, the board of construction giant Carillion on Monday said that it had “no choice but to take steps to enter into compulsory liquidation with immediate effect’’. | Following several days of tense negotiations, the board of construction giant Carillion on Monday said that it had “no choice but to take steps to enter into compulsory liquidation with immediate effect’’. |
| The company has been plagued by substantial debt as a result of a slowdown in many of its markets. It's been forced to issue a string of profit warnings in the last year and is battling a gaping pensions deficit. | The company has been plagued by substantial debt as a result of a slowdown in many of its markets. It's been forced to issue a string of profit warnings in the last year and is battling a gaping pensions deficit. |
| It recorded a more than £1.4bn loss during the first half of its financial year and the departure of its chief executive last year also contributed to an investor exodus, sending shares plummeting from around 230 pence a year ago to just over 14 pence at Friday's market close. | It recorded a more than £1.4bn loss during the first half of its financial year and the departure of its chief executive last year also contributed to an investor exodus, sending shares plummeting from around 230 pence a year ago to just over 14 pence at Friday's market close. |
| Carillion employs some 46,000 people worldwide, of which 20,000 are in the UK, and holds major contracts for prisons, the NHS and the armed forces. Only in July last year, it won major contracts to build the new High Speed 2 rail line, to connect London with the north of the country. | Carillion employs some 46,000 people worldwide, of which 20,000 are in the UK, and holds major contracts for prisons, the NHS and the armed forces. Only in July last year, it won major contracts to build the new High Speed 2 rail line, to connect London with the north of the country. |
| On Monday, the company said it had made “considerable efforts” to retain financial support, including from its creditors, like RBS, Santander and HSBC. | On Monday, the company said it had made “considerable efforts” to retain financial support, including from its creditors, like RBS, Santander and HSBC. |
| Crisis talks over the weekend focussed on “options to reduce debt and strengthen the group’s balance sheet”. But those discussions had "not been successful" leading the board to conclude "that it had no choice but to take steps to enter into compulsory liquidation with immediate effect". | Crisis talks over the weekend focussed on “options to reduce debt and strengthen the group’s balance sheet”. But those discussions had "not been successful" leading the board to conclude "that it had no choice but to take steps to enter into compulsory liquidation with immediate effect". |
| Carillion reportedly has total debt and liabilities of around £1.5bn and Neil Wilson, a senior market analyst at ETX Capital, described the situation as "a terrible mess and one that will take a long time to clean up”. | Carillion reportedly has total debt and liabilities of around £1.5bn and Neil Wilson, a senior market analyst at ETX Capital, described the situation as "a terrible mess and one that will take a long time to clean up”. |
| “This was a case of bad management and pitching for contracts at any price, but the Government and banks could, or may be should, have done more,” he said. | “This was a case of bad management and pitching for contracts at any price, but the Government and banks could, or may be should, have done more,” he said. |
| Fiona Cincotta, senior market analyst at City Index, said that the developments, which put thousands of jobs at risk, are “yet another huge embarrassment for the UK Government, which appears to be moving from mishap to mishap”. | |
| She also pointed out that the fact that Carillion has gone into liquidation rather than administration “scream volumes over the state of the financials at the firm”. | |
| “There were no assets to sell so no administration,” she explained. An administration keeps options open for the company to avoid total insolvency, whereas liquidation leads to the complete dissolution of a company and the selling off of all its assets. | |
| Philip Green, Carillion's chairman, said the Government would now pick up the bill to maintain the public services Carillion currently runs. | Philip Green, Carillion's chairman, said the Government would now pick up the bill to maintain the public services Carillion currently runs. |
| Ministers had been under fierce pressure to intervene to prevent the collapse of the company, largely because of its heavy involvement in key infrastructure projects. | Ministers had been under fierce pressure to intervene to prevent the collapse of the company, largely because of its heavy involvement in key infrastructure projects. |
| Labour said that it would question the group about how the situation was allowed to become so serious and the Unite union called for an inquiry into the crisis. | Labour said that it would question the group about how the situation was allowed to become so serious and the Unite union called for an inquiry into the crisis. |
| Campaigners had also demanded Carillion not be bailed out with public money. | Campaigners had also demanded Carillion not be bailed out with public money. |
| "The fact such a massive government contractor like Carillion has been allowed to [go into liquidation] shows the complete failure of a system that has put our public services in the grip of shady profit making contractors,” said Rehana Azam, GMB National Secretary. | |
| "The priority now for the Government and administrators is making sure kids in schools still get fed to day - and our members still have jobs and pensions,” she added. | "The priority now for the Government and administrators is making sure kids in schools still get fed to day - and our members still have jobs and pensions,” she added. |
| "There is no place for private companies who answer to shareholders, not patients, parents and service users in our public services. What’s happening with Carillion yet again shows the perils of allowing privatisation to run rampant in our schools, our hospitals and our prisons." | "There is no place for private companies who answer to shareholders, not patients, parents and service users in our public services. What’s happening with Carillion yet again shows the perils of allowing privatisation to run rampant in our schools, our hospitals and our prisons." |
| Tim Roache, GMB general secretary, said that Prime Minister Theresa May “must act right now to bring Carillion contracts back into public ownership”. | |
| “That is the only way to safeguard the jobs and services this mess has put at risk.” | |
| He accused the Government of spoon-feeding the company taxpayers’ money by awarding them contracts even after it had issued profit warnings. | |
| “Ministers should be hanging their heads in shame today - it’s a complete shambles.” | |
| Chairs of the Carillion pension schemes described the news as “very disappointing”. | Chairs of the Carillion pension schemes described the news as “very disappointing”. |
| They said that they would now work with PwC, who has been appointed to manage the liquidation, and the Pension Protection Fund to “deliver detailed information to members about how their benefits will be affected, and provide them with all the support that we can”. | They said that they would now work with PwC, who has been appointed to manage the liquidation, and the Pension Protection Fund to “deliver detailed information to members about how their benefits will be affected, and provide them with all the support that we can”. |
| “We are in the process of issuing an initial communication to all members, and we will make further information available as soon as possible, including by establishing a dedicated web page,” they said. | “We are in the process of issuing an initial communication to all members, and we will make further information available as soon as possible, including by establishing a dedicated web page,” they said. |