Carillion collapse has put 20,000 jobs at risk
MORE than 20,000 jobs were thought to be in jeopardy last night after construction firm Carillion went into liquidation.
The company has hundreds of public sector contracts, providing school catering, hospital cleaning and major building projects.
It went bust after running up debt and liabilities of about £ 1.5billion.
Carillion had been one of the country’s biggest building companies, working on the Channel Tunnel, Royal Opera House and Tate Modern, as well as providing a vast range of services to schools, hospitals, jails and the transport network.
Cabinet Office minister David Lidington admitted the collapse was a “crisis” but insisted taxpayers should not be landed with a massive bill following the demise.
Senior ministers held talks in Whitehall’s Cobra emergency briefing room last night.
Downing Street officials admitted eight new contracts between Carillion and public sector bodies had been signed since a City profits warning about the firm last July.
Banks are reportedly set to lose an estimated £ 2billion owing to the collapse. In a statement to the Commons, Mr Lidington told MPs: “It is regrettable that Carillion has not been able to find suitable financing options with its lenders.
“It is, however, the failure of a private sector company and it is the company’s shareholders and its lenders who will bear the brunt of the losses.
“Taxpayers should not and will not bail out a private sector company for private sector losses or allow rewards for failure.”
He had earlier said: “Our primary responsibility has always been to keep our essential public services running safely. For clarity – all employees should keep coming to work, you will continue to get paid. Staff that are engaged on public sector contracts still have important work to do.”
Carillion is behind the incomplete £ 335million Royal Liverpool Hospital, which has seen its launch date repeatedly pushed back. It is not yet clear what the firm’s collapse will mean for the new site.
Carillion chairman Philip Green said: “This is a very sad day for Carillion, for our colleagues, suppliers and customers we have been proud to serve over many years.”
SHARES in Galliford Try and Balfour Beatty fell as Carillion’s partners counted the cost of their joint ventures with the collapsed construction and services company, yesterday.
Balfour, which snubbed a £ 3billion merger bid from Carillion in 2014 and shares three road projects with it, faces a £ 35- 45million hit as it picks up Carillion’s share of the investment to ensure their completion. It said it would “continue to work with customers and will meet contractual commitments”, adding it has no other material financial exposure to Carillion.
Galliford, which along with Balfour has been working with Carillion on a £ 550million road scheme in Aberdeen, estimated the Carillion contribution outstanding at £ 60- 80million. Its shares fell 93p to 1185p, while Balfour lost 10p to 297 ½ p.
Analysts also warned of losses for HS2 contractor Carillion’s lenders, which include Barclays, HSBC and Lloyds. It has £ 900million debt, but complex arrangements for its subsidiaries mean banks’ exposure could be higher. Broker Liberum said: “The banks rank ahead of the trade creditors and employees in a liquidation. However, we would expect the banks to lose hundreds of millions. This will reduce their lending appetite.”
But it flagged opportunities for Car illion’s rivals to win new business. One contractor said: “We would not want to buy contracts where commercial terms have already been agreed as these could be very difficult to unpick. But having one less main contractor around opens up opportunities.”
Shares in FTSE 250 outsourcer Serco Group, which bought £ 90million of Carillion’s £ 150million healthcare assets, gained 7 ¼ p to 105 ½ p. Analysts said it could pick up the remaining healthcare business.
Rail contracts with Network Rail including electrification could be targeted by the likes of Balfour and Costain. Ministry of Defence deals could be opened up for Babcock International, while Kier Group, which expects no adverse financial impact from its joint venture HS2 and Highways England smart motorways programmes with Carillion, could look for more roads work.
Kier shares rose 38p to 1120p.