Why was failing building giant given £1.5bn of State contracts?

MINISTERS were facing questions last night over the decision to award more than £1.5billion of contracts to construction giant Carillion as the firm teetered on the brink of collapse.

Officials at the Cabinet Office were locked in talks with company bosses yesterday amid fears that it could go under as soon as today without a government bailout.

Theresa May was under pressure to unveil state help for the firm, which is a key supplier to the Government and has contracts in the rail industry, including HS2, edufor cation and the NHS. It employs 43,000 staff.

But last night a row was growing over its contracts.

In the past six months, the firm has issued three profit warnings and its share price has fallen from £2.30 last January to less than 20p today.

In the same period, three contracts have been awarded – one worth £1.4billion for HS2, another with the Ministry of Defence worth £158million, and the £62million deal to electrify the rail line between London and Corby.

Labour MP Jon Trickett, shadow minister for the Cabinet Office, said: ‘Alarm bells have been ringing for over six months about the state of Carillion’s finances, so the Government must come forward and answer questions on exactly what due diligence measures were undertaken before awarding contracts worth billions of taxpayers’ money.’

Tory party chairman Brandon Lewis said the Government was keeping a ‘very close eye’ on the crisis.

The public sector union Unite called for an inquiry and warned tens of thousands of jobs were at risk.

And last night it emerged that Sir Jeremy Heywood, the Cabinet Secretary, could be questioned by MPs on why government contracts were given to Carillion despite repeated profit warnings.

Bernard Jenkin, chairman of the Commons public administration committee, said a new inquiry would be held into government procurement, outsourcing and contracting.

Carillion has met lenders to discuss options to reduce debts, recapitalise or restructure the group’s balance sheet. It is believed administrators could be called in as early as

‘Alarm bells have been ringing’

this morning unless shareholders, creditors or the Government agree to stump up funds to save it.

Carillion has struggled since reporting half-year losses of £1.15billion and a meeting was held on Friday to discuss its pensions deficit.

Labour health spokesman Jon Ashworth warned the collapse of Carillion could badly affect the NHS, where it is running several building projects as well as facilities management at a handful of hospitals. Shadow transport secretary Andy McDonald said the HS2 contract demonstrated ‘an appalling lack of judgment’.

TUC deputy general secretary Paul Nowak said: ‘Tens of thousands of jobs are at risk, along with vital public services and major infrastructure projects across the country.

‘The Government needs to step in, guarantee jobs and services, and explain how they let this mess happen.’