Construction group plunges into administration
Construction group Carillion has plunged into administration after its lenders refused to provide the debt-laden group with £300 million of new funding without government intervention to resolve its financial crisis.
Chairman Philip Green said he expected the government to step in and provide the necessary funding to maintain the service contracts on UK roads, hospitals and prisons held by Carillon and to minimise the disruption to its subcontractors and suppliers.
A statement from 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.
“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.”
The firm, based in Wolverhampton, employs 43,000 staff around the world with 20,000 of those in the UK, has been put into the hands of the official receiver with PricewaterhouseCoopers appointed as special managers to wind down the business.
Carillion, which struggled with debts of around £900 million and a pension scheme deficit of around £580 million, faced cost overruns on a number of contracts in the UK and Middle East.
It issued two profits warnings last year with its market value plunging from £1 billion to £61 million, prompting the Opposition to demand why the government had continued to award it contracts, including involvement in the High-Speed (HS2) rail link to the North of England.
David Kirk, an insolvency specialist with 25 years’ experience, added his thoughts on the situation, commenting: “Carrillon used a lot of subcontractors so it got the work and handed it out to other firms. On liquidation Carillon’s financial position could become a lot worse because; all the redundancy costs of the staff crystallise.
“Staff who have been there 20 years plus may be entitled to up to 30 weeks’ pay; all the contracts they had will be breached by the liquidation, meaning the customer has to find another contractor and is entitled to claim the costs of breach against Carillion. Lastly, even if 20% can be recovered by creditors, it will be months if not years before the creditors see that money.
“The knock-on effect can mean lots of contractors who worked for Carillion, who aren’t entitled to any employment rights, could be financially impacted, causing them to go bust as well.”