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Carillion liquidation: Government to hold Cobra crisis meeting – live updates Carillion liquidation: Government to hold Cobra crisis meeting – live updates
(35 minutes later)
There seems to be some confusion about this crisis meeting....
Downing Street is now correcting the Defence Secretary and saying it is not a Cobra meeting but a meeting of junior ministers to discuss Carillion. @Number10press
Q. When is a COBRA meeting not a COBRA meeting? A. (from Downing Street) When it's a planned ministerial meeting that happens to be taking place in Cabinet Office Briefing Room A #Carillion
The Public Accounts Committee is now quizzing the cabinet office’s top civil servants about why Carillion was handed public sector contracts at a time when City hedge funds were betting against the company.
Q: Why can’t the government tell a company like Carillion to ‘take a holiday’ from bidding for government contracts, because they look high risk?
Because it’s against the law, shoots back permanent secretary John Manzoni.
Q: So how can you be mitigaging risks if you are handing Carillion contracts that you don’t want to?
We never award contracts that we don’t want to, Manzoni replies. The government always does a full review of every company involved when we award these bids.
Manzoni describes Carillion’s liquidation as a “very unusual” move, designed to prevent a sudden breakdown in public services.
We have put it to the Official Receiver with an instruction to keep public services running....
The cost of that is no greater than running these contracts in the normal course of business.
But, there will be some additional costs incurred by the Official Receiver, which the taxpayer will pick up.
Cabinet Office perm sec John Manzoni comes close to a 'crisis, what crisis?' moment on #Carillion. "Companies fail and succeed and we need to accept some of that will happen...some wheel is going to come off somewhere in the structure." But says lessons hv bn learned in past.
Newsflash: Britain’s Public Administration and Constitutional Affairs Committee is launching a new inquiry following Carillion’s liquidation.
The inquiry will be called “Sourcing public services: lessons to be learned from the collapse of Carillion”.
PAC committee chairman Bernard Jenkin says it will go wider than just Carillion, and will look at issues raised by the committee in previous years such as the provision of IT services.
Jenkin announced the probe as his committee grills three top civil servants from the cabinet office – Sir Jeremy Heywood, Cabinet Secretary, John Manzoni, Permanent Secretary, and Rupert McNeil, Chief People Officer.
UK parliamentary committee says it will launch inquiry into government outsourcing in light of #Carillion collapse pic.twitter.com/sZIeZIWgVR
Over in parliament, defence minister Gavin Williamson has revealed that the government will hold a crisis meeting later today to discuss the collapse of Carillion.Over in parliament, defence minister Gavin Williamson has revealed that the government will hold a crisis meeting later today to discuss the collapse of Carillion.
During defence questions, Williamson told MPs that:During defence questions, Williamson told MPs that:
We’ve been monitoring this very closely, and working with our industrial partners.We’ve been monitoring this very closely, and working with our industrial partners.
There will be a Cobra meeting today later on today to look at addressing some of the most immediate issues.There will be a Cobra meeting today later on today to look at addressing some of the most immediate issues.
Cobra stands for Cabinet Office briefing room A. It is an emergency council meeting which is convened when the government faces a big crisis - particularly one which involves several government departments.Cobra stands for Cabinet Office briefing room A. It is an emergency council meeting which is convened when the government faces a big crisis - particularly one which involves several government departments.
In Defence’s case, Carillion managed 50,000 military homes in partnership with AMEY (as explained this morning).In Defence’s case, Carillion managed 50,000 military homes in partnership with AMEY (as explained this morning).
Williamson says that the government will work with AMEY to ensure that standards are driven up, and to make sure that service quality doesn’t suffer.Williamson says that the government will work with AMEY to ensure that standards are driven up, and to make sure that service quality doesn’t suffer.
Gavin Williamson - COBRA will meet later today to discuss Carillion.Gavin Williamson - COBRA will meet later today to discuss Carillion.
NEW: Government emergency committee COBRA is meeting later today to discuss the collapse of Carillion - it will "look at addressing some of the most immediate issues", Defence Secretary Gavin Williamson saysNEW: Government emergency committee COBRA is meeting later today to discuss the collapse of Carillion - it will "look at addressing some of the most immediate issues", Defence Secretary Gavin Williamson says
George Osborne’s attempt to blame the civil service for the Carillion crisis may be backfiring, as photos of the ex-chancellor posing in Carillion-branded hard hats hit the internet.George Osborne’s attempt to blame the civil service for the Carillion crisis may be backfiring, as photos of the ex-chancellor posing in Carillion-branded hard hats hit the internet.
How did it happen I wonder pic.twitter.com/AGNkqwxO0sHow did it happen I wonder pic.twitter.com/AGNkqwxO0s
Osborne on Carillion: Then and Now https://t.co/a8KDMzw7Bk pic.twitter.com/bj51omNRo6Osborne on Carillion: Then and Now https://t.co/a8KDMzw7Bk pic.twitter.com/bj51omNRo6
The serious point is that Osborne had a massive influence on Britain’s finances for several years, and pushed on with PFI contracts after becoming chancellor. This crisis can’t simply be blamed on civil servants; their job is to implement government policy.The serious point is that Osborne had a massive influence on Britain’s finances for several years, and pushed on with PFI contracts after becoming chancellor. This crisis can’t simply be blamed on civil servants; their job is to implement government policy.
Britain’s corporate governance watchdog, the Financial Reporting Council, have revealed they have been “actively” watching the situation at Carillion.Britain’s corporate governance watchdog, the Financial Reporting Council, have revealed they have been “actively” watching the situation at Carillion.
That’s may not be much comfort to Carillion’s workers and clients. But it could suggest that Carillion’s auditors, KPMG, will face investigation.That’s may not be much comfort to Carillion’s workers and clients. But it could suggest that Carillion’s auditors, KPMG, will face investigation.
The FRC says:The FRC says:
We have been actively monitoring this situation for some time in close consultation with other relevant regulatory bodies.We have been actively monitoring this situation for some time in close consultation with other relevant regulatory bodies.
We have powers to investigate the circumstances relating to the audit of Carillion as well as the actions of the relevant accounting professionals.We have powers to investigate the circumstances relating to the audit of Carillion as well as the actions of the relevant accounting professionals.
We are obliged to follow due process and will make a further statement on this matter shortly.We are obliged to follow due process and will make a further statement on this matter shortly.
Recruitment firm Speedy Hire is being pummelled by City traders, sending its shares down by up to 8% today. Equipment firm Speedy Hire is being pummelled by City traders, sending its shares down by up to 8% today.
Carillion was a major customer for Speedy Hire, which supplies tools to the construction industry.Carillion was a major customer for Speedy Hire, which supplies tools to the construction industry.
Serco the winner, Speedy Hire the loser today from the #Carillion collapse pic.twitter.com/w0WmlmOMr8Serco the winner, Speedy Hire the loser today from the #Carillion collapse pic.twitter.com/w0WmlmOMr8
The collapse of Carillion has also caused alarm in the Republic of Ireland.The collapse of Carillion has also caused alarm in the Republic of Ireland.
Ireland correspondent Henry McDonald reports:Ireland correspondent Henry McDonald reports:
The Irish government has been urged to act swiftly and decisively regarding five schools in Ireland that have been left in limbo over the collapse of Carillion.The Irish government has been urged to act swiftly and decisively regarding five schools in Ireland that have been left in limbo over the collapse of Carillion.
Main opposition party Fianna Fail has warned today that the schools are completely unsure as to what will happen their building projects which under the remit of Carillion.Main opposition party Fianna Fail has warned today that the schools are completely unsure as to what will happen their building projects which under the remit of Carillion.
Fianna Fail Education spokesperson Thomas Byrne said one of the schools is in his own Meath East constituency.Fianna Fail Education spokesperson Thomas Byrne said one of the schools is in his own Meath East constituency.
“Eureka Secondary School in Kells is due to open in a matter of weeks but as a result of the difficulties at Carillion, there is doubt as to when it might happen, and who will provide the facilities management and catering services in the school.”“Eureka Secondary School in Kells is due to open in a matter of weeks but as a result of the difficulties at Carillion, there is doubt as to when it might happen, and who will provide the facilities management and catering services in the school.”
Byrne called on the state to take over the running of the non-academic services at all five schools and then possibly tender again for the contracts after Carillion’s collapse.Byrne called on the state to take over the running of the non-academic services at all five schools and then possibly tender again for the contracts after Carillion’s collapse.
Update: Cabinet Office minister David Lidington is expected to update MPs on the Carillion crisis at around 4.15pm.Update: Cabinet Office minister David Lidington is expected to update MPs on the Carillion crisis at around 4.15pm.
Defence in Parliament update: 3.30pm today - urgent question about the National Security Capability Review. So this will follow defence oral questions at 2.30pm. Government statement on Carillion expected around 4.15pm. https://t.co/eJ3knaOJz2Defence in Parliament update: 3.30pm today - urgent question about the National Security Capability Review. So this will follow defence oral questions at 2.30pm. Government statement on Carillion expected around 4.15pm. https://t.co/eJ3knaOJz2
A spokesman for the RMT rail workers union said it was “almost inevitable” that some trains won’t be cleaned today due to the collapse of Carillion.A spokesman for the RMT rail workers union said it was “almost inevitable” that some trains won’t be cleaned today due to the collapse of Carillion.
That’s due to the problems with its fuel cards (see earlier post)That’s due to the problems with its fuel cards (see earlier post)
The company employed train cleaners, who were issued with vans to get from job to job and fuel cards to pay for petrol.The company employed train cleaners, who were issued with vans to get from job to job and fuel cards to pay for petrol.
With the company in liquidation, those fuel cards have stopped working, making it impossible for cleaning staff to do their jobs unless they are willing to dip into their own pockets.With the company in liquidation, those fuel cards have stopped working, making it impossible for cleaning staff to do their jobs unless they are willing to dip into their own pockets.
If your train carriage on the commute home is filthy this evening, that might be why.If your train carriage on the commute home is filthy this evening, that might be why.
Sam O’Callaghan, solicitor in the construction, energy and projects team at Capital Law, predicts that Carillion’s project portfolio will face “significant” difficulties.
Sub-contractors, consultants, and clients may end up losing out on money that they’re contractually entitled to. Secured creditors (like banks) will be putting their hands in the insolvency pot first.
Every sub-contractor, consultant, or anyone involved in a contractual chain with Carillion should take immediate action – starting by reviewing their contract, or getting their lawyer to do so.”
The Press Association is reporting that fuel cards issued to Carillion workers were rejected at petrol stations this morning.
PA says:
Train cleaners have been told to work normally, but their fuel cards are not working, according to the Rail, Maritime and Transport union.
One cleaner filled up at a petrol station, but the Carillion Fuel Card bounced.
The RMT said it was the start of the “brutal reality” facing Carillion workers.
Conrad Landin of the Morning Star has more details:
.@rmtunion says Carillion cleaners on Arriva Rail North have been told to work as normal this morning - but their fuel cards are not working
One worker has filled up at a petrol station, but after his Carillion fuel card bounced he now has no means of paying for his petrol ⛽️
Frank Field MP, Chair of the Work and Pensions Select Committee, has condemned Carillion for allowing its pension deficit to swell (to at least £580m).
In a statement, Field says tougher rules are needed to prevent firms acting recklessly.
“Carillion took on mega borrowings while its pension deficit ballooned. We called over a year ago for The Pensions Regulator to have mandatory clearance powers for corporate activities like these that put pension schemes at risk, and powers to impose truly deterrent fines that would focus boardroom minds.
“If Government had acted then, the brakes might have been put on Carillion’s massive ramping up of debt and it never would have fallen into this sorry crisis. It seems we have a new case like this every week, and this one is particularly disastrous, with massive job losses and 28,000 current and future pensioners at risk.
I would like to ask the Government today: what more is it going to take?”
Carillion’s collapse is good news for one group -- its rivals.
Shares in outsourcing group Serco have surged by over 5% this morning, as traders predict that it will pick up some juicy contracts in the aftermath of Carillion’s demise.
In the long-term, the loss of Carillion could allow the rest of the sector to push up their prices too.
Connor Campbell of Spreadex says:
Of course there were plenty of vultures in the sector circling the Carillion carrion. Serco Group, which bought £47.7 million in healthcare contracts from the crisis-hit company back in December, jumped 4.5%, while Capita climbed 1% and Interserve rose 2.6%.
As chancellor of the exchequer between 2010 and 2016, George Osborne had a tight grip on the nation’s purse strings.
Now, in his new role as editor of the Evening Standard, Osborne blames the civil service for handing too many contracts to big firms like Carillion.
Today’s Standard editorial explains:
The failure to use a variety of smaller, mid-size companies undermines innovation and leaves services hostage when things go wrong.
Why was Carillion awarded huge contracts by the civil service, with whom rather than ministers almost all procurement decisions lie after they knew it was struggling last year?
Above all, how we will insist — as we must — that shareholders are bailed in before the taxpayer is asked to fund any kind of bailout?
We wait for answers.
Today’s editorials @EveningStandard on banning plastic straws and the collapse of Carillion https://t.co/PgYlNhR4ju
Back in December 2014, Osborne took a tour of a Carillion training centre in Middlesborough, where he learned how to lay bricks and hang a door. Perhaps he could offer his services to those local authorities struggling to replace Carillion today....
Peter Kitson, Partner at law firm Russell-Cooke, says Carillion may have caused its own demise by pitching its services at an uncompetitively low rate - to win business.
”The procurement rules (the Public Contracts Regulations) which govern public sector procurement are central to understanding what has happened here. Almost all Carillion contracts have been competitively tendered under those procurement rules.
The rules require public sector clients to investigate and possibly to exclude any tenderer whose bid is ‘abnormally low’. One contributory factor here may be that Carillion has tendered at very low margins, possibly unsustainably low, in order to win these huge volumes of work.
If such bids have succeeded, that can only mean either than the Regulations themselves are ineffective or that public sector clients lack the confidence or the expertise properly to enforce those rules.
Following this morning’s announcement, I am sure that many of those public sector clients will be seeking advice on the extent to which those same procurement rules allow short term emergency replacement contracts to be let without formal procurement.”
The British Army is reassuring military families that Carillion’s collapse won’t hurt them:
The financial situation of Carillion has no direct impact on services provided directly to those working for Armed Forces or their families. Housing will continue to be serviced, catering facilities run, and buildings and offices cleaned.
Carillion was employed by the government to manage around 50,000 homes used by armed forces personnel and their families.
Carillion’s collapse will have widespread consequences for local authorities and housing associations across the UK.
Andrew Lancaster, partner at Anthony Collins Solicitors, says organisations may face extra costs as they scramble to find new contractors to step in.
While it’s likely some key public sector contracts will be ring-fenced and supported in some way by the government, local authorities and housing associations still need to provide their residents and communities with resilient public services in the coming week. This means back up contractors need to be found immediately, requiring huge amounts of time, resource and additional expenditure.
“I would urge such organisations to read their contracts’ payment and termination clauses and, crucially, to comply with them to avoid any claims from the liquidator later on for any breach
Here’s my colleague Dan Sabbagh, reporting from today’s House of Commons lobby briefing on Carillion:
The prime minister’s official spokesman said that some of Carillion 450 public sector contracts could be taken in house, although that was “a decision for further down the line”.
However, the contracts for building part of the HS2 rail link would remain in the private sector, he added. Kier and Eiffage, the other two construction partners, had given ministers assurances they could take the work to build the London to Birmingham part of the line without Carillion.
He described the collapse of the company as “very regrettable” and said that ministers had been monitoring the situation since the company’s profits warning in July. Only a “single figure” number of contracts had been let to Carillion since then, including those for the HS2 build, and in the case of joint ventures assurances had been sought in all circumstances.
Number 10 added there would be no significant extra costs in servicing contracts held by the collapsed company bar paying for the expenses of the Official Receiver which has taken control of the firm.
There were no plans for an official inquiry into the company’s collapse beyond an already announced investigation to be held by the receiver whose job it is to ‘investigate the cause of failure’.