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You can find the current article at its original source at https://www.theguardian.com/business/live/2018/jan/15/carillion-crisis-liquidation-last-ditch-talks-fail-business-live
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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 collapse will have widespread consequences for local authorities and housing associations across the UK. | |
Andrew Lancaster, partner at Anthony Collins Solicitors, says organisations may face extra costs as they scramble to find new contractors to step in. | |
While it’s likely some key public sector contracts will be ring-fenced and supported in some way by the government, local authorities and housing associations still need to provide their residents and communities with resilient public services in the coming week. This means back up contractors need to be found immediately, requiring huge amounts of time, resource and additional expenditure. | |
“I would urge such organisations to read their contracts’ payment and termination clauses and, crucially, to comply with them to avoid any claims from the liquidator later on for any breach | |
Here’s my colleague Dan Sabbagh, reporting from today’s House of Commons lobby briefing on Carillion: | |
The prime minister’s official spokesman said that some of Carillion 450 public sector contracts could be taken in house, although that was “a decision for further down the line”. | |
However, the contracts for building part of the HS2 rail link would remain in the private sector, he added. Kier and Eiffage, the other two construction partners, had given ministers assurances they could take the work to build the London to Birmingham part of the line without Carillion. | |
He described the collapse of the company as “very regrettable” and said that ministers had been monitoring the situation since the company’s profits warning in July. Only a “single figure” number of contracts had been let to Carillion since then, including those for the HS2 build, and in the case of joint ventures assurances had been sought in all circumstances. | |
Number 10 added there would be no significant extra costs in servicing contracts held by the collapsed company bar paying for the expenses of the Official Receiver which has taken control of the firm. | |
There were no plans for an official inquiry into the company’s collapse beyond an already announced investigation to be held by the receiver whose job it is to ‘investigate the cause of failure’. | |
The Institute of Directors has issued a stinging rebuke to Carillion’s top executives and directors over its pay policies. | |
Roger Barker, head of corporate governance at the IoD, is particularly alarmed that the company changed its bonus rules to protect top bosses. | |
Today’s outcome suggests that effective governance was lacking at Carillion, and we must now consider if the board and shareholders have exercised appropriate oversight prior to the collapse. | |
“There are some worrying signs. The relaxation of clawback conditions for executive bonuses in 2016 appears in retrospect to be highly inappropriate. It does no good to the reputation of UK business when top managers appear to benefit in spite of the collapse of the organisations that they are responsible for. | |
Those bonus changes meant that money could only be clawed back if Carillion misstated its results or if an executive committed gross misconduct. | |
Lord Adonis - who earlier suggested Carillion could be a British Enron - says the government should consider taking its contracts back into state control. | |
It may be best value for the government to take over public sector contracts, rather than hand them to other companies who will demand a “King’s Ransom”, Adonis tells Sky News. | |
That might be an ideological switch for the Conservative government, but Adonis insists that they have a duty to protect the taxpayer. | |
Carillion’s shocking collapse should trigger a full review of the privatisation of public services in the UK, says Guardian columnist Simon Jenkins: | 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. | 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. | 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. | 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. | 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. | “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. | “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.” | “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: | 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. | 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. | “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. | 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: | 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. | “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. | “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. | 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 | 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. | 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. | 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. | 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.” |