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Where did it go wrong for Carillion? Where did it go wrong for Carillion?
(2 days later)
UK construction firm Carillion is in huge financial trouble. Construction giant Carillion is going into liquidation after its huge financial troubles finally overwhelmed it.
The UK's second-largest construction company is shouldering a whopping £1.5bn debt pile and some fear it could collapse into administration. The UK's second-largest construction company buckled under the weight of a whopping £1.5bn debt pile.
Despite discussions between Carillion, its lenders and the government, no deal could be reached to save the company.
The big concern is over the disruption this might cause, given Carillion holds so many government contracts - from building hospitals to managing schools.The big concern is over the disruption this might cause, given Carillion holds so many government contracts - from building hospitals to managing schools.
It also employs about 20,000 people in the UK and has more staff abroad.It also employs about 20,000 people in the UK and has more staff abroad.
So how did the company get into such dire straits?So how did the company get into such dire straits?
What does Carillion do?What does Carillion do?
Carillion specialises in construction, as well as facilities management and ongoing maintenance.Carillion specialises in construction, as well as facilities management and ongoing maintenance.
It has worked on big private sector projects such as the Battersea Power station redevelopment and the Anfield Stadium expansion.It has worked on big private sector projects such as the Battersea Power station redevelopment and the Anfield Stadium expansion.
But it is perhaps best known for being one the largest suppliers of services to the public sector. But it is perhaps best known for being one of the largest suppliers of services to the public sector.
Notably, it holds a contract to build part of the forthcoming HS2 high speed railway line and is the second largest supplier of maintenance services to Network Rail. Notably, it is part of a consortium that holds a contract to build part of the forthcoming HS2 high speed railway line, and it is the second largest supplier of maintenance services to Network Rail.
It also maintains 50,000 homes for the Ministry of Defence, manages nearly 900 schools and manages highways and prisons.It also maintains 50,000 homes for the Ministry of Defence, manages nearly 900 schools and manages highways and prisons.
How big is it?How big is it?
Very. Carillion employs 43,000 staff globally, around half of them in the UK where it does most of its business. It also operates in Canada, the Middle East and the Caribbean.Very. Carillion employs 43,000 staff globally, around half of them in the UK where it does most of its business. It also operates in Canada, the Middle East and the Caribbean.
In 2016 it had sales of £5.2bn and until July boasted a market capitalisation of almost £1bn. But since then its share price has plummeted and it's now worth just £61m. In 2016, it had sales of £5.2bn and until July boasted a market capitalisation of almost £1bn. But since then its share price has plummeted, leaving it worth just £61m.
What has gone wrong for the firm? What went wrong for the firm?
Some argue it has over-reached itself, taking on too many risky contracts that have been unprofitable. It also faced payment delays in the Middle East that hit its accounts. Some argue that it overreached itself, taking on too many risky contracts that proved unprofitable. It also faced payment delays in the Middle East that hit its accounts.
Last year it issued three profit warnings in five months and wrote down more than £1bn from the value of contracts. Last year, it issued three profit warnings in five months and wrote down more than £1bn from the value of contracts.
This has made it much harder to manage its mountainous £900m debt pile and £600m pension deficit. This made it much harder to manage its mountainous £900m debt pile and £600m pension deficit.
In December the firm convinced lenders to give it more time to repay them. In December, the firm convinced lenders to give it more time to repay them.
However, the company's banks, which include Santander UK, HSBC and Barclays, are understood to be reluctant to lend it any more cash. However, the company's banks, which include Santander UK, HSBC and Barclays, were reluctant to lend it any more cash.
Why does it matter if it collapses? Why does its collapse matter?
As Carillion is such a big supplier to the public sector, some fear its collapse would cause a lot of disruption. As Carillion is such a big supplier to the public sector, some fear there will be a lot of disruption.
Labour MP Jon Trickett told parliament that if it went under, it would risk "massive damage" to a range of public services. Labour MP Jon Trickett told Parliament before the announcement that if it went under, it would risk "massive damage" to a range of public services.
Thousands of jobs also hang in the balance. Unions have said workers do not deserve to be caught in the crossfire and have urged the government to safeguard their jobs and bring Carillion's contracts back in house.Thousands of jobs also hang in the balance. Unions have said workers do not deserve to be caught in the crossfire and have urged the government to safeguard their jobs and bring Carillion's contracts back in house.
The government has said that "contingency plans are in place" and it is closely monitoring the situation. The government, which has praised Carillion's work on projects such as Crossrail, has said it will provide funding to maintain the public services run by the firm.
The big question is who would pick up the firm's loss-making public contracts if it went under - another outsourced services provider or the government itself? Analysts say Carillion had a large order book of business lined up.
Or would the government - which says Carillion continues to do good work on projects like Crossrail - be prepared to provide emergency financial support until it gets its house in order? The big question is, who will ultimately pick up its loss-making public contracts - another outsourced services provider or the government itself?
Analysts say Carillion has a large order book of business lined up, but will be unable to deliver it unless its cash flow problems are resolved.