The £4billion shockwave
Carillion collapse costs banks hundreds of millions, hits rivals for £80m and causes building shares to slump . . .
BANKS, engineering firms and thousands of small businesses are nursing losses of around £4bn after the collapse of Carillion.
The builder, which traces its roots back more than 100 years, went into compulsory liquidation at around 7am yesterday in one of the UK’s largest corporate collapses.
The Wolverhampton-based group succumbed to debts and liabilities of around £1.5bn.
Its collapse threatens the futures of around 28,000 members of its pension scheme, 48,500 workers around the world and about 5,000 suppliers.
Banks were thought to be braced for the biggest financial hit, with lenders including Barclays, HSBC, Lloyds and Santander UK looking at losses of around £2bn.
The firm’s latest published debt figure is around £900m but sources said complex financing arrangements for subsidiaries means lenders could be facing losses of double that.
Six companies – Carillion Plc, Carillion Construction, Carillion Services, Planned Maintenance Engineering, Carillion Integrated Services and Carillion Services 2006 – were all placed in liquidation, with PwC appointed to support the official receiver.
PwC said there was no prospect of any return to shareholders, meaning heavy losses for those who had not cashed out amid hopes the stock could recover.
Brewin Dolphin, one of the UK’s largest fund managers, had about 5pc meaning it would have lost about £41m since the disastrous trading update in July, assuming it bought all of its shares before then.
Standard Life Investments and Kiltearn Partners, with a 4.96 pc and 4.94pc stake respectively would have lost similar amount.
Overall, the top ten shareholders as of yesterday would have lost about £579m since July, not including anything they had sold since that time.
The fall-out also hammered businesses working with Carillion, with up to 30,000 estimated to be losing out on £1bn in unpaid bills.
Rudi Klein, head of Britain’s Specialist Engineering Contractors’ Group, estimated Carillion had left a trail of £1.2bn in unpaid bills to thousands of small subcontractors. He cited a Northern Irish engineering contractor owed £150,000 and a concrete frame manufacturer in north west England owed £2m. ‘This can’t be allowed to happen again,’ he said. Carillion had about 5,000 direct small business suppliers, with fears growing last night that several could go bust in its wake.
Mike Cherry, chairman of the Federation of Small Businesses, said: ‘I wrote to Carillion in July last year to express concern after hearing from members that the company was making small suppliers wait 120 days to be paid.’
Big builders were among those badly hit.
Balfour Beatty and Galliford Try were working with Carillion on the Aberdeen bypass, with Galliford saying the pair expected to have to stump up around £80m between them to finish the job.
Balfour was also working with Carillion on the A14 in Cambridge and the M62 junction 20, and said it expected its own total hit from the collapse to be up to £45m.
James Tetley, deputy head of research at broking company N + 1 Singer, said: ‘People are looking at possible winners from this but in the short-term, it’s a pretty grim day for the UK construction sector.’
Brian Berry, chief executive of the Federation of Master Builders, said: ‘Carillion’s liquidation is terrible news for all those who work for the company.’