Britain investigates Carillion directors after collapse

Ivan Schwartz
January 17, 2018

The government has promised to take over Carillion's public contracts and it will cover some of the liquidation costs.

The jobs and pensions of 20,000 workers it employed in the United Kingdom (and a further 23,000 internationally) are at risk, along with those of tens of thousands of subcontractors and small businesses.

But confidence in Carillon's ability to manage the crisis, in spite of the new contracts, was fading fast, and in September it warned again that profits would fall short of expectations.

Blue Monday proved to live up to its name with the news that we were all dreading. For us, Carillion were a good firm, they paid us on time and we had lots of work from them.

As one analyst at City Index rather succinctly put it, "this is yet another huge embarrassment for the United Kingdom government, which appears to be moving from mishap to mishap".

After all Carillion provides 450 separate taxpayer funded contracts to the public.

"What people don't always realise is that you don't just lose money you are owed when something like this happens - you lose the forward order book, and for us that could've been half a million pounds".

The staggering collapse means taxpayers will have to foot the bill for receivers so Carillion's "vital" public service contracts at everywhere from schools to hospitals and the railways can continue.

The firm spent £952 million with local suppliers in 2016 and owe money to up to 30,000 small businesses.

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As of July 2017, Carillion had more than 28,500 members in final salary schemes and a deficit of £587m ($808m, €660m).

FSB development manager Paul Foster said: "There will undoubtedly be a ripple effect felt by businesses and their employees either directly or indirectly in the supply chain in Lancashire". Separately, Carillion was criticized Monday by the Institute of Directors, which said there were signs that management relaxed clawback conditions for executive bonuses as the company ran into trouble.

Cabinet Office minister David Lidington chaired a meeting of the emergency COBRA committee on Monday night following the collapse of the major public service provider.

"It's time we took back control", Corbyn said in a video.

Carillion has public sector or public/private partnership contracts worth £1.7 billion, 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.

MPs launched an inquiry into the affair, despite a senior civil servant's claim that officials had "played a blinder" in protecting the taxpayer.

Carillion said it had no choice but to go into compulsory liquidation after weekend talks with creditors failed to get the short-term financing it needed to continue operating.

Rail, Maritime and Transport union general secretary Mick Cash said: The blame for this lies squarely with the Government who are obsessed with outsourcing key works to these high-risk private enterprises. Workers, however, were left in the dark, and jobs, pensions and essential social provisions hang in the balance. They will of course still be expected to pay any outstanding labour or materials costs for the work they have incurred or purchased and make Value-Added Tax payments due to the crown authorities which may in some cases include their invoices to Carillion.

Brian Berry, chief executive of the FMB, said: "Construction SMEs train two thirds of all apprentices and are a sure-fire way of spreading economic growth more evenly through the United Kingdom".

Other reports by GizPress

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