Carillion goes into liquidation after rescue talks with lenders fail
The UK’s second largest construction company, which had been in emergency financing talks with its lenders and the banks since last week, employs 20,000 people in the UK, has debts of £1.15 billion and a pension shortfall of over half a billion.
Its current Scottish projects include the extension of platforms at Edinburgh Waverley station and the new £745 million Aberdeen bypass.
The firm is also responsible for two facilities management contracts with the Ministry of Defence (MoD) worth £158m which cover 83 military sites in Scotland and was responsible for providing the day-to-day repairs for West of Scotland Housing Association (WSHA).
A key supplier to the UK government with high-tariff contracts within the HS2 and Crossrail projects, Carillion also has contracts in the rail industry, education and NHS.
Philip Green, chairman of Carillion, 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.
“Over recent months huge efforts have been made to restructure Carillion to deliver its sustainable future and the Board is very grateful for the huge efforts made by Keith Cochrane, our executive team and many others who have worked tirelessly over this period.
“In recent days however we have been unable to secure the funding to support our business plan and it is therefore with the deepest regret that we have arrived at this decision.
“We understand that HM Government will be providing the necessary funding required by the Official Receiver to maintain the public services carried on by Carillion staff, subcontractors and suppliers.”
“It is regrettable… but taxpayers cannot be expected to bail out a private company.”
The announcement follows a troubled period for the contractor which delivered a massive profit warning in July last year and the removal of Richard Howson as its chief executive.
In November it revealed that it expects to breach its financial covenants by the end of December and that full-year profits will be “materially lower” than current expectations.
And just this month the Financial Conduct Authority (FCA) revealed it was investigating “the timeliness and content of announcements made by Carillion between 7 December 2016 and 10 July 2017”.
An application was made to the High Court for a compulsory liquidation of Carillion before opening of business today.
An order has been granted to appoint the Official Receiver as the liquidator of Carillion.
The Official Receiver will make an application to the High Court for PricewaterhouseCoopers LLP (PWC) to be appointed as Special Managers, to act on behalf of the Official Receiver.
The UK government is expected to step in with funding to ensure Carillion’s public services contracts continue.
MP David Lidington, Minister for the Cabinet Office and Chancellor for the Duchy of Lancaster, said: “It is regrettable that Carillion has not been able to find suitable financing options with its lenders but taxpayers cannot be expected to bail out a private sector company.
“Since profit warnings were first issued in July, the Government has been closely monitoring the situation and has been in constructive discussion with Carillion while it sought to refinance its business. We remained hopeful that a solution could be found while putting robust contingency plans in place to prepare for every eventuality. It is of course disappointing that Carillion has become insolvent, but our primary responsibility has always been keep our essential public services running safely.
“We understand that some members of the public will be concerned by recent news reports. 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.
“Since its inception in the 1990s private finance has helped to deliver around £60 billion of much-needed capital investment in infrastructure in the UK across a range of projects and we will continue to maintain partnerships with responsible firms in future.”
Carillion was created in 1999 when the Tarmac Group demerged into a building materials company that kept the Tarmac name and a company focused on support services and construction services, called Carillion. It included the former construction business of George Wimpey, which it swapped for its Tarmac house-building division.
Since 1999, Carillion has acquired Mowlem (2006), Alfred McAlpine (2008), Vanbots (2008) and Eaga (2011).