Carillion had needed a £300 million cash boost to keep operating
Carillion had needed a £300 million cash boost to keep operatingFACUNDO ARRIZABALAGA/EPA
Carillion collapsed into liquidation this morning after last-ditch rescue talks with its lenders and the government failed to secure financial support.
Ministers are facing questions about why hundreds of millions of pounds of work was awarded to the public sector contractor even after it issued a string of profit warnings.
The group holds part of the contract to build HS2 and also oversees hospitals, schools and prisons. It employs almost 20,000 people in the UK. It had required a £300 million cash boost to keep operating.
It said that it had “no choice but to take steps to enter into compulsory liquidation with immediate effect” after talks failed to find another way to deal with the company’s debts.
The consultancy PWC is expected to make an application to the High Court to act as the official receiver and the government is expected to provide emergency financial support to ensure that Carillion can continue to trade.
Ministers were said to have been reluctant to provide a direct rescue package. Sir Vince Cable, the Liberal Democrat leader, had urged the government not to agree to a taxpayer-funded bailout.
Philip Green, the chairman, 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.” [BO--CKS!...ed.]
Unions reacted angrily, claiming that it showed the “perils” of letting the private sector “run rampant in our schools, our hospitals and our prisons”. They have called for a public inquiry into Carillion’s troubles.
Rehena Azam, national secretary of the GMB, said: “The fact such a massive contractor like Carillion has been allowed to go into administration shows the complete failure of a system that has put our public services in the grip of shady profit-making contractors.
“The priority for the government and administrators is making sure kids in our schools still get fed today and our members have jobs and pensions.”
There was also anger that Richard Howson, the chief executive who resigned from Carillion last year after its large profits warning, will be paid his £660,000 salary and £28,000 benefits for 12 months after his departure. [WHY?...ed.]
About 28,000 members of the pension scheme will transfer into the Pension Protection Fund and see their lifetime payouts reduced by about 15 per cent, according to John Ralfe, a pensions consultant.
Steve Webb, the former pensions minister who is now director of policy at Royal London, the pensions provider, said: “Carillion workers will understandably be devastated by the announcement of the liquidation of their firm. But they, and retired Carillion workers, can be assured that the pensions ‘lifeboat’ . . . will help to protect their pensions.”
David Lidington, the Cabinet Office minister, said that the government departments that had contracts with Carillion had been drawing up “contingency plans” for its collapse since the profit warnings were issued last year. He said that the priority was to maintain the provision of public services that would have been handled by the firm.
Mr Lidington, Theresa May’s de factor number two who is expected to stand in for the Tory leader at prime minister’’s questions when she is absent, said: “The message to workers is: ‘Come into work today, there’s important work to be done, we [the government] will pay you’.” [doesn't he mean "the taxpayer" will pay them?...ed.]
Chris Grayling, who as transport secretary awarded the HS2 work to Carillion a week after the company had issued a profits warning and its chief executive had departed, is among those in government being called on to account for their decisions.
Lord Adonis, the Labour peer who quit as head of the National Infrastructure Commission last month, tweeted that the government had “got questions to answer about propping up Carillion with contracts long after its problems clear. Looks like another Grayling bailout!” He was also critical of Mr Grayling’s decision to allow struggling rail companies to end their contracts early and avoid £2 billion in franchise payments to the government.
Carillion is an outsourcing company with operations spanning construction to catering. Its biggest customer has been the government, which pays it about £1.7 billion a year — a third of the company’s revenues — through a range of contracts across the public sector including managing prisons and providing school meals. The company has been struggling with a £900 million debt pile and a £590 million pension deficit.
Its problems stem in part from cost overruns on three public-private partnership contracts: building the £350 million Midland Metropolitan Hospital in Birmingham, the £335 million Royal Liverpool University Hospital and the £745 million Aberdeen bypass.
The company issued profit warnings over the second half of last year, sending its share price crashing by more than 90 per cent. A week after the first warning, a joint venture between Carillion and two other companies was given a £1.4 billion contract to work on the HS2 high-speed rail line.
The company was also given a 50 per cent stake in a £158 million contract by the Defence Infrastructure Organisation, part of the Ministry of Defence, to provide services to 130 military sites.
In November, after a second profit warning, it was awarded a £62 million contract with Network Rail to upgrade the London to Corby track, and a joint venture in which it has a 50 per cent stake was awarded a £260 million contract for the electrification of the route.
Jon Trickett, the shadow Cabinet Office minister, said: “It raises serious questions about the competence of Chris Grayling but also the government too.
The Department for Transport declined to comment yesterday but HS2 Limited has previously said that it carried out additional due diligence on the contract to the Carillion joint venture. Its partners in the venture had guaranteed to underwrite each other and would step in if Carillion failed, HS2 said.
A Network Rail source said that the electrification work was a joint venture and that Carillion’s partner would have to step in if Carillion went under. A spokesman for the government said that it was monitoring the situation “while working to ensure our contingency plans are robust”. [but you have to say that - lame!!...ed.]
[Sir] Philip Green - a very clever man:

Sir Philip Green's retail empire reels from BHS closure and Topshop ...

https://www.theguardian.com/.../sir-philip-green-retail-empire-bhs-closure-topshop-fa...
7 Jun 2017 - Sir Philip Green's retail empire suffered a worse than expected 79% fall in profits last year as it reeled from the closure of BHS and a tough fashion market, ... redundancies and other costs linked to BHS, which collapsed last April, about a year after Green sold it for £1 to investors led by formerbankrupt and ...
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27 Jun 2017 - Sir Philip Green sold BHS for £1 to a former bankrupt with no experience of retail. Photograph: Justin ... Sir Philip Green was pushed to pay into BHS's pension after the industry regulator found the “main purpose” in selling the department store was to prevent taking on liability for the scheme. The Pension ...

Philip Green - Wikipedia

https://en.wikipedia.org/wiki/Philip_Green
Sir Philip Nigel Ross Green (born 15 March 1952) is a British businessman, and the chairman of Arcadia Group, a retail company that includes Topshop, Topman, Wallis, Evans, Burton, Miss Selfridge, Dorothy Perkins, and Outfit. The BHS department store chain used to be part of the group. Green has been involved in a ...
Net worth‎: ‎£3.8 billion (2017)
Nationality‎: ‎British
Political party‎: ‎Conservative
Children‎: ‎Chloe; Brandon; ‎Stasha Palos‎ (step...