Bosses will be investigated after collapse of Carillion

Firm crashes with ‘£1.7bn’ of contracts

TOP BOSSES at Carillion are to be investigated amid fears that the construction firm’s collapse will leave a “trail of destruction” which could threaten the futures of smaller firms around the country.

The UK’s second-biggest contractor was placed into compulsory liquidation after talks held over the weekend with the Government broke up without a deal on Sunday night. It was reported that Carillion wanted £20 million to help it secure more funds from banks, a far lower figure than had been previously speculated, but Ministers were unwilling to offer financial support.

Carillion is understood to have public-sector or public/ private partnership contracts worth £1.7bn, including providing school dinners, cleaning and catering at NHS hospitals, construction work on rail projects such as HS2 and maintaining 50,000 Army base homes for the Ministry of Defence.

Carillion chairman Philip Green said: “This is a very sad day for Carillion, for our colleagues, suppliers and customers that we have been proud to serve over many years.”

David Lidington, the Cabinet Office Minister, told Parliament yesterday that the Official Receiver will now investigate the role of the company’s former and current directors in its collapse, warning they could face “severe penalties”.

It comes amid growing anger at bumper payouts received by the firm’s former chief executive Richard Howson.

He pocketed £1.5 million in salary, bonuses and pension payments during 2016 and, as part of his departure deal, Carillion agreed to keep paying him a £660,000 salary and £28,000 in benefits until October.

The group’s demise has posed questions as to why Carillion continued to receive Government contracts, such as the deal covering the HS2 rail project, despite issuing a number of profit warnings, most recently in July 2017.

Downing Street revealed yesterday that eight contracts had been signed since the latest profit warning, including a deal agreed last Monday but not yet signed with Leeds City Council to provide a new orbital road. Other contracts include the Rotherham-Sheffield tram-train scheme, the Great Yorkshire Way near Doncaster and the A1 improvement project in North Yorkshire.

Carillion’s fall into compulsory liquidation has put thousands of jobs at risk, but the Government said staff should go to work and would continue to be paid. Many small firms are also waiting for Carillion to pay bills going back several months.

Kelly Burton, director and insolvency practitioner at Yorkshire-based Wilson Field, said the news would be “the fulfilment of your worst nightmares” for the many firms which work for Carillion and are owed money.

She said: “When a large enterprise like Carillion fails it leaves behind it a trail of destruction. The domino effect on the infrastructure of companies which supplied Carillion can see them then become financial casualties.

“It is highly likely that any money which is owed to your company will not be paid, leaving you with an immediate cashflow problem. The thought of your business not being able to pay suppliers, staff wages – even your own mortgage – will be very frightening.”

Prime Minister Theresa May’s official spokesman said that, initially, the Government will be paying staff through the Official Receiver to ensure that public services continue to run as normal.

Hundreds of workers and their families face terrible uncertainty. MP Rachel Reeves, who chairs the Business, Energy and Industrial Strategy Committee.

A YORKSHIRE council says it has not signed off a contract for a vital £115m ring road that was awarded to stricken construction firm Carillion in the last month.

Leeds City Council was one of many authorities to hand out work to the company, which has been struggling under £900m of debt and has issued a string of profit warnings in the last six months.

The contractor has a host of public-sector contracts across Yorkshire, including the muchdelayed scheme to enable trams to run on existing train tracks as well as on tram lines in Rotherham and Sheffield, which is due to be completed this year.

It was also one of the firms involved in the construction of the Great Yorkshire Way link road between the motorway network and Doncaster Sheffield Airport and a project to replace the existing dual carriageway with a new three-lane motorway on the A1 in North Yorkshire.

It was reported this week that Carillion had secured the firstphase contract for the £115m East Leeds Orbital Route (ELOR), one of the most important infrastructure projects in the city. The council had a deadline of December 28 to award the contract.

As part of the deal, the firm was to deliver three roundabouts worth about £7m and enter into an ‘early contractor involvement deal’ for the £80m contract to deliver 7.5km of dual carriageway.

Carillion was also the contractor for the Leeds City Centre Cycle Superhighway, due to finish this year, and the Tower Works development in Holbeck, on land owned by Homes England.

Tom Riordan, Leeds City Council Chief Executive, said yesterday: “We are looking at the impact the news about Carillion will have on the council and wider city.

“We know Carillion’s situation is not just affecting Leeds, and we are liaising with central government to see how we can help ensure services and contracts are still delivered successfully. We have been monitoring Carillion’s situation and planning accordingly and are now implementing those plans.”

Mr Riordan added: “While Carillion were the preferred bidder for the ELOR work, a final contract had not been signed off. The contingency plans in place reflect the fact that we have been monitoring Carillion’s situation and planning accordingly.”

Separately, Carillion’s 250 Sheffield call centre staff have been told they will be paid. Workers leaving the building in Broad Street West said they had been verbally warned their jobs were at risk but they would be paid in January and to carry on as usual.

Sheffield Central MP Paul Blomfield said: “This is a company that has grown rich on taxpayers’ money through publicsector contracts and those at the top have grown very rich indeed. I want to ensure that people in Sheffield don’t lose out as a result of [its] mismanagement.”

Rotherham MP Sarah Champion urged the Government to ensure the Rotherham–Sheffield tram-train scheme was not further delayed. Carillion was working for Network Rail on the job.

She said: “The Government needs to be prepared to bring public contracts back into state control and act quickly to provide reassurances to... workers.”

A Network Rail spokeswoman said all of Carillion’s work ‘would continue for the time being’ as they worked with the official receiver and special manager.

Highways England said plans had been put in place to “ensure the continued safe delivery” of schemes such as the A1 project.

Doncaster council said it was hopeful the Greater Yorkshire Way project could continue with minimal impact. Carillion was jointly awarded the £6.2m contract to deliver the second phase of the scheme last March. It was due for completion in April 2018.

Peter Dale, director of regeneration and environment, said: “We are currently working with Carillion staff and the receiver PricewaterhouseCooopers who are seeking to move forward and honour existing contracts. We are also working with Tarmac to look at contingency plans if Carillion are unable to continue with the work.”

This is a company that has grown rich on taxpayers’ money. Sheffield Central MP Paul Blomfield.