Ripple effect yet to be felt by supply chain, warns Bank

UNCERTAINTY hung over private contracts run by Carillion this week – with fears workers would not be paid from Wednesday.

However, the Insolvency Service has stepped in to reassure the vast majority of the firm’s private customers who had indicated they wanted the firm to carry on providing services until new suppliers could be found.

The announcement came as a 48-hour period of support for firms working on Carillion’s private sector contracts approached its end, with thousands uncertain about their future.

A spokesman for the Insolvency Service said: “More than 90 per cent of these customers have indicated they want Carillion to continue providing services in the interim until new suppliers can be found. Work has paused on construction sites, pending decisions as to how and if they will be restarted.”

The Bank of England also said lenders to Carillion were not under direct threat but warned the ripple effects from the collapse were yet to be fully felt.

But some members of Carillion’s supply chain now appear to be feeling the effects of the liquidation.

Companies in the supply chain could be owed as much as £2 billion, with one Labour MP, Kevan Jones, saying in the Commons that Carillion was “notorious” among subcontractors as a late payer.

In Birmingham, the development team behind the Paradise project in Chamberlain Square moved quickly to reassure people work there would not be greatly affected.

Construction work on One Chamberlain Square on the old Central Library site has been progressing for over a year and was recently topped out. It is due for completion in summer 2019 when financial services firm PwC will move its Birmingham team to a new home.

Rob Groves, regional director of Argent, which is the development manager of Paradise, said: “Our strong relationships with the supply chain and main contractors, along with a robust contingency strategy, means we are confident that One Chamberlain Square will not be adversely affected.

“The site-wide works are now more than 80 per cent complete and BAM will be on site in February starting construction of Two Chamberlain Square as programmed.”

Another partner of Carillion’s, construction group Kier, also moved swiftly to clarify its position on the HS2 contract.

CEK, a joint venture between Carillion, French civil engineering group Eiffage and Kier, was awarded a £1.4 billion contract last July to build some of the tunnels which will make up phase one of HS2.

At the time, all three firms were forced to give assurances they could step in to deliver on the work if one of the partners collapsed.

Kier said: “We have put in place contingency plans for our projects and are working closely with clients so as to achieve continuity of service. After a short period of transition for these contracts, we do not expect there to be an adverse financial impact on the group arising from these joint venture contracts.”

A HS2 spokesman added: “We are continuing to discuss with Kier and Eiffage the implementation of contingency plans. Work will continue as planned with no unnecessary or additional exposure to the taxpayer.”

Like Paradise, work on the new 669-bed Midland Metropolitan Hospital, which will substantially replace emergency services currently provided at City Hospital and Sandwell Hospital, is well under way.

NHS managers have begun talks with the Treasury to try to ensure the hospital can open as planned in 2019.