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Carillion liquidation: Taxpayers face 'raw deal' as staff urged to keep working - live updates Carillion liquidation: Taxpayers face 'raw deal' as staff urged to keep working - live updates
(35 minutes later)
Carillion’s shocking collapse should trigger a full review of the privatisation of public services in the UK, says Guardian columnist Simon Jenkins:
What the Carillion saga demonstrates is the rampant indiscipline in the contracts themselves. The company’s demise is attributable to favouritism, cost escalation, excessive risk, obscene remuneration and reckless indebtedness. Carillion and its bankers clearly thought it too big to fail. Whitehall behaved accordingly. It was like a pre-2008 bank.
There must now be a review of how privatisation is working. Its so-called parastatal companies are not true private entities. They depend on the state, and the state depends on them. Their lobbyists develop an unholy relationship with ministers and officials – witness the uncontrolled revolving door between Whitehall and the boardrooms.
Lee Causer, partner at accountancy firm Moore Stephens, predicts that Carillion’s failure will have “huge ramifications” across the construction sector.
He expects contracts to be delayed, and some suppliers to go bust.
“Many of Carillion’s suppliers will have automatically assumed that a group the size of Carillion would be rescued. Therefore, many will not have prepared for its collapse and will struggle to get alternative contracts in place.
“The failure of Carillion will inevitably lead to disruption across the supply chain, and financial turmoil for sub-contractors who relied on business from Carillion.
“Its collapse could trigger a number of insolvencies across the construction sector, in an industry that already experiences the highest levels of insolvency per year in the UK.”
Professor John Colley of Warwick Business School says Carillion was sunk by two serious mistakes:
Too many contracts were taken at poor margins and terms, which prevented any subsequent profitability under competitive pressure. Some were allocated during the recession when it was win work at all costs.
“The other key issue is project accounting, which tends to recognise losses late in the project, effectively when the project starts to run out of money. There will no doubt be serious retrospective scrutiny of the accounting.
Sarah Beale, chief executive at the Construction Industry Training Board (CITB), fears that Carillion’s apprentices could soon be out of work.
She is pushing the Official Receiver to support Carillion’s trainees:
“The news of Carillion entering insolvency is clearly a significant blow to the UK construction sector. While this will present the sector with a number of challenges, CITB’s priority is to do all it can to ensure that Carillion apprentices can continue their training so their skills are not lost.
“We have established a project team to work with the apprentices and will be offering in principle grant and apprenticeship transfer incentives to our employer base in order to retain these learners.
Newsflash: Theresa May’s spokesman is briefing journalists about Carillion’s collapse.
He says it is ‘regrettable’ that Carillion couldn’t find the funding required to keep operating, but taxpayers can’t be expected to bail it out
But he also confirms that some costs will be incurred from the liquidation, as the government will cover the costs of the Official Receiver.
He says the HS2 high-speed rail project is not at risk, and will be delivered.
Some Carillion contracts may have to be taken back in house "further down the line" says the PM's official spox. But not HS2, which the other contractors will take on.
Carillion’s army of workers are suffering a ‘terribly time’ today, says UNISON general secretary Dave Prentis.Carillion’s army of workers are suffering a ‘terribly time’ today, says UNISON general secretary Dave Prentis.
“Staff need assurances about whether they have a job, who will pay their wages, and what’s going to happen to their pensions.“Staff need assurances about whether they have a job, who will pay their wages, and what’s going to happen to their pensions.
“The government needs to move quickly to bring these contracts back in-house – to safeguard our services and to protect the many staff in schools, hospitals, local authorities and libraries.“The government needs to move quickly to bring these contracts back in-house – to safeguard our services and to protect the many staff in schools, hospitals, local authorities and libraries.
“It’s disgraceful that Carillion was lining the pockets of its shareholders, even though the company’s future was increasingly uncertain.“It’s disgraceful that Carillion was lining the pockets of its shareholders, even though the company’s future was increasingly uncertain.
Prentis also fears that taxpayers will pick up the bill for the company’s failure.Prentis also fears that taxpayers will pick up the bill for the company’s failure.
“Crucial public services have been put at risk, and the taxpayer is going to be stuck picking up the bill for yet another failed privatisation experiment.“Crucial public services have been put at risk, and the taxpayer is going to be stuck picking up the bill for yet another failed privatisation experiment.
“Carillion holds key contracts across the health service – with the current winter pressures, staff shortages and underfunding, further uncertainty puts the NHS in a precarious position.”“Carillion holds key contracts across the health service – with the current winter pressures, staff shortages and underfunding, further uncertainty puts the NHS in a precarious position.”
Last week, my colleague Aditya Chakrabortty warned that the Carillion crisis could have a major impact on the UK:Last week, my colleague Aditya Chakrabortty warned that the Carillion crisis could have a major impact on the UK:
This is a firm that employs just under 20,000 workers in Britain – and the same again abroad. It has a huge chain of suppliers – and its habit of going in for joint ventures with other construction businesses means that a collapse at Carillion would send shockwaves through the industry and through the government’s public works programme.This is a firm that employs just under 20,000 workers in Britain – and the same again abroad. It has a huge chain of suppliers – and its habit of going in for joint ventures with other construction businesses means that a collapse at Carillion would send shockwaves through the industry and through the government’s public works programme.
To see what this means, take the HS2 rail link, where Carillion this summer was part of a consortium that won a £1.4bn contract to knock tunnels through the Chilterns. If Carillion goes under, what happens to the largest infrastructure project in Europe?To see what this means, take the HS2 rail link, where Carillion this summer was part of a consortium that won a £1.4bn contract to knock tunnels through the Chilterns. If Carillion goes under, what happens to the largest infrastructure project in Europe?
What happens to its partners on the deal, British firm Kier, and France’s Eiffage? The project will need to be put back and the taxpayer will almost certainly have to step in.What happens to its partners on the deal, British firm Kier, and France’s Eiffage? The project will need to be put back and the taxpayer will almost certainly have to step in.
The decision to put Carillion into a full-blown compulsory liquidation shows how little value was left within the company.The decision to put Carillion into a full-blown compulsory liquidation shows how little value was left within the company.
David Birne, insolvency partner at chartered accountants H W Fisher & Company, says it is ‘extremely rare’ move for a company of Carillion’s size - and bad news for its staff.David Birne, insolvency partner at chartered accountants H W Fisher & Company, says it is ‘extremely rare’ move for a company of Carillion’s size - and bad news for its staff.
Birne warns:Birne warns:
“For Carillion’s 43,000 global staff, liquidation means the immediate risk of redundancy.“For Carillion’s 43,000 global staff, liquidation means the immediate risk of redundancy.
“For Carillion it will mean huge breach of contract penalties that could dwarf anything demanded of it by creditors.“For Carillion it will mean huge breach of contract penalties that could dwarf anything demanded of it by creditors.
“And there will undoubtedly be a knock-on effect for companies that supply Carillion that will go all the way down the supply chain to the smallest firms.“And there will undoubtedly be a knock-on effect for companies that supply Carillion that will go all the way down the supply chain to the smallest firms.
Andy Street, the former John Lewis boss who became the first mayor of the West Midlands last year, is setting up a taskforce to support employees of Carillion and subcontractors affected by the company’s collapse.Andy Street, the former John Lewis boss who became the first mayor of the West Midlands last year, is setting up a taskforce to support employees of Carillion and subcontractors affected by the company’s collapse.
The taskforce will involve the Black Country chambers of commerce, city council, Local Enterprise Partnership and West Midlands combined authority.The taskforce will involve the Black Country chambers of commerce, city council, Local Enterprise Partnership and West Midlands combined authority.
“We don’t yet know how many of those staff will transfer as some parts of the business hopefully are sold on,” said Street.“We don’t yet know how many of those staff will transfer as some parts of the business hopefully are sold on,” said Street.
He adds:He adds:
“We’ll want to make sure as much cash as can be raised is raised, so that small businesses who are subcontractors are paid as much as possible and the contagion is limited.“We’ll want to make sure as much cash as can be raised is raised, so that small businesses who are subcontractors are paid as much as possible and the contagion is limited.
“It’s good news that the Carillion contracts for public services have got a commitment that they will be secured, whether it’s schools or prisons services, that’s taken care of and it’s right that’s the first priority”.“It’s good news that the Carillion contracts for public services have got a commitment that they will be secured, whether it’s schools or prisons services, that’s taken care of and it’s right that’s the first priority”.
Street is on his way this morning to the Midland Metropolitan hospital, a major unfinished project that was among those that went wrong for Carillion.Street is on his way this morning to the Midland Metropolitan hospital, a major unfinished project that was among those that went wrong for Carillion.
Responding to uncertainty about its future, Street said:Responding to uncertainty about its future, Street said:
“We don’t know the contractual arrangements but we’ll be pressing, given how critical it is to the West Midlands. We’ll be looking for a new contractor so it continues to be built.”“We don’t know the contractual arrangements but we’ll be pressing, given how critical it is to the West Midlands. We’ll be looking for a new contractor so it continues to be built.”
Construction firm Galliford Try has issued a statement.... revealing that it also faces a financial hit from Carillion’s demise.Construction firm Galliford Try has issued a statement.... revealing that it also faces a financial hit from Carillion’s demise.
Galliford says:Galliford says:
The Group is in joint venture with Carillion and Balfour Beatty on the £550m Aberdeen Western Peripheral Route contract. The terms of the contract are such that the remaining joint venture members, Balfour Beatty and Galliford Try, are obliged to complete the contract.The Group is in joint venture with Carillion and Balfour Beatty on the £550m Aberdeen Western Peripheral Route contract. The terms of the contract are such that the remaining joint venture members, Balfour Beatty and Galliford Try, are obliged to complete the contract.
Our current estimate of the additional cash contribution outstanding from Carillion to complete the project is £60-80 million, of which any shortfall will be funded equally between the joint venture members.Our current estimate of the additional cash contribution outstanding from Carillion to complete the project is £60-80 million, of which any shortfall will be funded equally between the joint venture members.
Galliford’s shares are down by almost 4% this morning, at the bottom of the FTSE 250.Galliford’s shares are down by almost 4% this morning, at the bottom of the FTSE 250.
Balfour Beatty are down 2.3%, after revealing it faces a hit of £35m to £45m.Balfour Beatty are down 2.3%, after revealing it faces a hit of £35m to £45m.
Just in: Cabinet Office minister David Lidington will give a statement to the House of Commons later today on the collapse of Carillion.Just in: Cabinet Office minister David Lidington will give a statement to the House of Commons later today on the collapse of Carillion.
Statement confirmed on #Carillion from @DLidington today in @HouseofCommonsStatement confirmed on #Carillion from @DLidington today in @HouseofCommons
Simon Underwood, business recovery partner at accountancy firm, Menzies LLP, also fears that small firms employed by Carillion could now collapse.Simon Underwood, business recovery partner at accountancy firm, Menzies LLP, also fears that small firms employed by Carillion could now collapse.
Underwood expects Carillion’s operations to keep running, probably propped up by government cash (ie, the taxpayer).Underwood expects Carillion’s operations to keep running, probably propped up by government cash (ie, the taxpayer).
But the liquidation could be ‘long and messy’, which could drag small firms under.But the liquidation could be ‘long and messy’, which could drag small firms under.
Underwood says:Underwood says:
“Carillion’s liquidation will have a significant impact on its many thousands of employees and on the company’s supply chain, which is likely to comprise a large number of UK-based sub-contractors.....“Carillion’s liquidation will have a significant impact on its many thousands of employees and on the company’s supply chain, which is likely to comprise a large number of UK-based sub-contractors.....
“Given that the company has now gone into liquidation, sub-contractors and suppliers could experience financial difficulties as a direct result of Carillion’s demise; potentially leading to knock-on insolvencies. If affected in this way, suppliers and sub-contractors should seek professional advice immediately.“Given that the company has now gone into liquidation, sub-contractors and suppliers could experience financial difficulties as a direct result of Carillion’s demise; potentially leading to knock-on insolvencies. If affected in this way, suppliers and sub-contractors should seek professional advice immediately.
Underwood adds that small businesses affected have some options:Underwood adds that small businesses affected have some options:
It may be possible to ease the cashflow burden by helping them to agree ‘Time to Pay’ arrangements with HMRC and possibly renegotiate terms with their own suppliers, either informally, or through a rescue process like a Voluntary Arrangement.”It may be possible to ease the cashflow burden by helping them to agree ‘Time to Pay’ arrangements with HMRC and possibly renegotiate terms with their own suppliers, either informally, or through a rescue process like a Voluntary Arrangement.”
My colleague Rob Davies is investigating how Britain’s construction industry is responding to Carillion’s collapse....My colleague Rob Davies is investigating how Britain’s construction industry is responding to Carillion’s collapse....
Carillion's major partner on the Midland Metropolitan hospital is property company Richardsons, which is refusing to answer questions and referring them to....Carillion. Which doesn't exist to all intents and purposes. Very poor.Carillion's major partner on the Midland Metropolitan hospital is property company Richardsons, which is refusing to answer questions and referring them to....Carillion. Which doesn't exist to all intents and purposes. Very poor.
Carillion's three major UK projects and partners.Midland Metropolitan hospital - Richardsons (no comment)Royal Liverpool University hospital - Pensions Infrastructure Platform (wiil provide statement soon)Aberdeen bypass - Galliford Try (ready to take it on)Carillion's three major UK projects and partners.Midland Metropolitan hospital - Richardsons (no comment)Royal Liverpool University hospital - Pensions Infrastructure Platform (wiil provide statement soon)Aberdeen bypass - Galliford Try (ready to take it on)
Former pensions minister Steve Webb is concerned that Carillion has been lavishing its shareholders with dividend payments, rather than tackling its pension deficit.Former pensions minister Steve Webb is concerned that Carillion has been lavishing its shareholders with dividend payments, rather than tackling its pension deficit.
2016 Carillion annual report says dividend ‘has increased in each of 16 years since formation of company’; Is this really acceptable alongside a pension fund deficit over half a billion pounds?2016 Carillion annual report says dividend ‘has increased in each of 16 years since formation of company’; Is this really acceptable alongside a pension fund deficit over half a billion pounds?
Infrastructure business Amey Group says it will take over the delivery of housing service for Britain’s military.Infrastructure business Amey Group says it will take over the delivery of housing service for Britain’s military.
Amey had been managing these contracts in a joint venture with Carillion, but is now taking up the job alone.Amey had been managing these contracts in a joint venture with Carillion, but is now taking up the job alone.
It says:It says:
Amey has incorporated joint ventures with Carillion to deliver the Regional Prime and National Housing contracts for the Ministry of Defence (MOD), through the Defence Infrastructure Organisation (DIO). These contracts maintain the MOD estate in the UK.Amey has incorporated joint ventures with Carillion to deliver the Regional Prime and National Housing contracts for the Ministry of Defence (MOD), through the Defence Infrastructure Organisation (DIO). These contracts maintain the MOD estate in the UK.
The terms of the joint ventures’ arrangements mean that Amey will continue the services now that Carillion has announced it is entering into immediate compulsory liquidation. Amey is committed to doing this and ensuring continuity of service to the DIO and MOD and the service men and women in the UK.The terms of the joint ventures’ arrangements mean that Amey will continue the services now that Carillion has announced it is entering into immediate compulsory liquidation. Amey is committed to doing this and ensuring continuity of service to the DIO and MOD and the service men and women in the UK.
Labour MP Matthew Pennycook says Amey must ensure that military families don’t suffer from Carillion’s demise.Labour MP Matthew Pennycook says Amey must ensure that military families don’t suffer from Carillion’s demise.
I’ll also be seeking reassurance that CarillionAmey, the private contractor responsible for maintenance of armed forces accommodation including those of many service families in #Woolwich, will not be impacted by the problems affecting its parent company.I’ll also be seeking reassurance that CarillionAmey, the private contractor responsible for maintenance of armed forces accommodation including those of many service families in #Woolwich, will not be impacted by the problems affecting its parent company.
Meg Hillier, chairwoman of the influential Public Accounts Committee, fears that taxpayers face a ‘raw deal’ from the Carillion collapse:Meg Hillier, chairwoman of the influential Public Accounts Committee, fears that taxpayers face a ‘raw deal’ from the Carillion collapse:
Hillier says (via the Press Association):Hillier says (via the Press Association):
Carillion’s collapse raises grave concerns about jobs, the delivery of public services and the way Government conducts its business.Carillion’s collapse raises grave concerns about jobs, the delivery of public services and the way Government conducts its business.
“The Public Accounts Committee has previously warned of the risks when contractors, paid from the public purse, become too big to fail.“The Public Accounts Committee has previously warned of the risks when contractors, paid from the public purse, become too big to fail.
“Government now faces a stark choice: bail Carillion out or let public services and projects suffer. Either way, taxpayers will get a raw deal.“Government now faces a stark choice: bail Carillion out or let public services and projects suffer. Either way, taxpayers will get a raw deal.
“Government has serious questions to answer about its role in allowing taxpayers’ exposure to escalate to this point.”“Government has serious questions to answer about its role in allowing taxpayers’ exposure to escalate to this point.”