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Carillion goes into liquidation after last-ditch talks fail - live updates Carillion liquidation: Government promises to pay staff to keep services running - live updates
(35 minutes later)
Carillion’s slump into liquidation is a major talking point in the City today.
Michael Hewson of financial spread-betting firm CMC Markets says:
It appears to be the end of the road for Carillion, one of the UK’s biggest construction companies, as it files for compulsory liquidation having run out of time to put together a restructuring package with its lenders.
The likelihood of a government bailout would appear to be remote, though the outstanding public sector contracts are set to taken in-house and run by the UK government. In terms of assets Carillion based on its 2016 accounts has tangible plant and machinery of £144m, a fraction of its overall debts, not to mention the £800m pensions liabilities.
Whether these services will then be tendered out to another provider in order to recoup some costs may well be difficult given the potential political fallout.
Banks, government ministers and Carillion’s own management must share the blame for the company’s ignominious failure, says Neil Wilson of ETX Capital:
This was a case of bad management and pitching for contracts at any price, but the government and banks could, or may be should, have done more.
Given the government was already up to its neck in this, shareholders have every right to be disappointed. The FCA is looking at the timing of profits warnings but you could also argue that the number and value of government contracts being awarded following those warnings also misled investors by painting a false picture of health. They may also question why banks that were bailed out by taxpayers were among those who forced the company to the brink. A terrible mess and one that will take a long time to clean up.
Rebecca O’Keeffe, Head of Investment at interactive investor, warns that Carillion’s collapse will send fear rippling through the economy.
The government’s decision to walk away from Carillion appears to be based on optics rather than logic and looks like the wrong decision was made for the wrong reasons.
There is no doubt that Carillion posed a huge political challenge for the government, which did not want to be seen to bail out another group of private shareholders and banks after suffering such a backlash from their decisions during the financial crisis.
However, the prospect of the government temporarily funding existing Carillion public service contracts, alongside the likely increase in costs for renegotiating contracts with new suppliers, make it highly likely that they could ultimately pay far more than if they had provided the guarantees that Carillion’s creditors needed.
Gemma Godfrey of investment site Moola says Carillion’s collapse shows the downside of outsourcing public sector work to private companies.
A private company makes profit from the project. And yet, when a situation like this arises, the government has to step in to make sure that the contracts are still honoured - as we’re talking about our schools and our healthcare.
We maintain the risk and have to bear some losses, as a taxpayer, rather than the private company that paid very large executive salaries.
Why our 2nd largest building company #Carillion going bust raises massive questions about the way we run our schools, healthcare & infrastructure projects. 20,000+ potential job losses. (@MoolaTeam @SkyNews @Nick_Hewer) pic.twitter.com/zly5vlm3RQ
David Lidington ducked a question about whether a public inquiry should be held into Carillion, as he urged staff to keep working.
But his opposite number, shadow cabinet office minister Jon Trickett MP, insists a ‘serious investigation’ is needed.
Trickett says:
“The Government must act quickly to bring these public sector contracts back in-house to protect public services and ensure employees, supply chain companies, taxpayers and pension fund members are protected.
“Given £2billion worth of Government contracts were awarded in the time three profit warnings were given by Carillion, a serious investigation needs to be launched into the Government’s handling of this matter.
“It is vital that shareholders and creditors are not allowed to walk away with the rewards from profitable contracts while the taxpayer bails out loss-making parts of the business.”
The government’s “first priority” is to ensure that the public services that were delivered by Carillion continue to operate.The government’s “first priority” is to ensure that the public services that were delivered by Carillion continue to operate.
Cabinet Office minister David Lidington tells Radio 4’s Today programme that:Cabinet Office minister David Lidington tells Radio 4’s Today programme that:
The message to workers is ‘come in to work today, there is important work to be done, and you will be paid’. “The first priority, the one that I’ve asked ministers and all officials to concentrate on, is actually ensuring that public services continue.
The government will pay your wages, via the official receiver not via Carillion. So the message to workers is, come in to work today, there’s important work to be done, and you will be paid. The government will pay your wages via the official receiver, not via Carillion.”
That money that has been budgeted for, for your wages, for those public sector contracts is there, because we want that continuity to be assured. “As we go forward, some services will be taken in house, some services will go out to alternative contractors in a managed, orderly fashion.
Lidington adds that some services previously supplied by Carillion will, in time, be handed to other operators.Lidington adds that some services previously supplied by Carillion will, in time, be handed to other operators.
As we go forwards, some services will be taken in house, some will go out to alternative providers in a managed, organised fashion.As we go forwards, some services will be taken in house, some will go out to alternative providers in a managed, organised fashion.
David Lidington, Cabinet Office minister, is on the Today Programme now discussing Carillion’s collapse.David Lidington, Cabinet Office minister, is on the Today Programme now discussing Carillion’s collapse.
Q: Why were huge contracts awarded to Carillion even though they were issuing profit warnings?Q: Why were huge contracts awarded to Carillion even though they were issuing profit warnings?
Lidington says Carillions’ collapse is regrettable.Lidington says Carillions’ collapse is regrettable.
The government decided that taxpayers can’t be expected to bail out a private sector company - especially when its problems didn’t come directly from its public sector work.The government decided that taxpayers can’t be expected to bail out a private sector company - especially when its problems didn’t come directly from its public sector work.
Contingency plans have been drawn up in recent months following Carillion’s first profits warning in 2017, Lidington explains.Contingency plans have been drawn up in recent months following Carillion’s first profits warning in 2017, Lidington explains.
That means that contracts were drawn up so that if Carillion failed, other contractors must now come in and take over Carillion’s responsibilities.That means that contracts were drawn up so that if Carillion failed, other contractors must now come in and take over Carillion’s responsibilities.
Q: But hedge funds have been betting against Carillion for months - why did you keep handing it new contracts?Q: But hedge funds have been betting against Carillion for months - why did you keep handing it new contracts?
Lidington repeats that contracts were drawn up in a way to guarantee public servicesLidington repeats that contracts were drawn up in a way to guarantee public services
This is a “managed liquidation and administration”, he says, addingThis is a “managed liquidation and administration”, he says, adding
“There will not be a fire sale of assets.“There will not be a fire sale of assets.
The government will pay the administrative costs of the Official Reciever so we can guarantee the supply of public services, he continues.The government will pay the administrative costs of the Official Reciever so we can guarantee the supply of public services, he continues.
Q: So will the taxpayer pick up the billl?Q: So will the taxpayer pick up the billl?
Lidington says the government will pay the costs of the official receiver, but he believes this will be “considerably less” than the cost of an unplanned collapse.Lidington says the government will pay the costs of the official receiver, but he believes this will be “considerably less” than the cost of an unplanned collapse.
Oxfordshire County Council has issued a statement, saying it has taken over services provided by Carillion, such as school meals.Oxfordshire County Council has issued a statement, saying it has taken over services provided by Carillion, such as school meals.
The council has been “planning for the possibility of Carillion’s collapse for some time,” and expects workers to turn up for work as usual. If they don’t, firefighters are ‘on standby’ to get Oxfordshire’s children fed.The council has been “planning for the possibility of Carillion’s collapse for some time,” and expects workers to turn up for work as usual. If they don’t, firefighters are ‘on standby’ to get Oxfordshire’s children fed.
Alexandra Bailey, the council’s Director for Property, Assets and Investment, says:Alexandra Bailey, the council’s Director for Property, Assets and Investment, says:
“We expect school staff will be in work as normal today but if this doesn’t happen we will provide school lunches to schools needing support, and the fire service are on standby to deliver them. We are confident no child will go hungry at school.“We expect school staff will be in work as normal today but if this doesn’t happen we will provide school lunches to schools needing support, and the fire service are on standby to deliver them. We are confident no child will go hungry at school.
“We thank schools for their support and understanding as we deal with the situation. I’d also like to thank staff for continuing to do a great job during a period of uncertainty, and to reassure them that the county council will ensure staff are paid.”“We thank schools for their support and understanding as we deal with the situation. I’d also like to thank staff for continuing to do a great job during a period of uncertainty, and to reassure them that the county council will ensure staff are paid.”
Council acts swiftly to take on services - including some school meals and cleaning - after Carillion goes into liquidation https://t.co/0an6GRUN3a pic.twitter.com/Wlwtw0BOeRCouncil acts swiftly to take on services - including some school meals and cleaning - after Carillion goes into liquidation https://t.co/0an6GRUN3a pic.twitter.com/Wlwtw0BOeR
Carillions’s shares have been temporarily suspended from trading on the London stock market.Carillions’s shares have been temporarily suspended from trading on the London stock market.
They have plunged in recent months, taking its value down to around £60m.They have plunged in recent months, taking its value down to around £60m.
Good news for commuters:Good news for commuters:
Rail passengers reassured that their services will be running as normal today as Carillion's work for Network Rail does not involve the day-to-day running of the railway - @networkrailRail passengers reassured that their services will be running as normal today as Carillion's work for Network Rail does not involve the day-to-day running of the railway - @networkrail
Carillion is the second biggest supplier of maintenance services to Network Rail, though, so its collapse is still a significant event.Carillion is the second biggest supplier of maintenance services to Network Rail, though, so its collapse is still a significant event.
Pressure is mounting fast on the UK government to set up a full public inquiry into the collapse of Carillion.Pressure is mounting fast on the UK government to set up a full public inquiry into the collapse of Carillion.
Jim Kennedy, Unite’s national officer for local government, says the company’s management must be held to account:Jim Kennedy, Unite’s national officer for local government, says the company’s management must be held to account:
“Public services, vast amounts of public money, thousands of jobs - including in a lengthy supply chain of insecure agency workers who are also at risk - and workers’ hard-saved pensions are all in danger of being dragged under by yet another bout of reckless corporate irresponsibility.“Public services, vast amounts of public money, thousands of jobs - including in a lengthy supply chain of insecure agency workers who are also at risk - and workers’ hard-saved pensions are all in danger of being dragged under by yet another bout of reckless corporate irresponsibility.
“There are also serious questions that need to be asked and answered about Carillion’s conduct.“There are also serious questions that need to be asked and answered about Carillion’s conduct.
“Did directors move to protect their bonuses before the financial stability of the company?“Did directors move to protect their bonuses before the financial stability of the company?
“Has the company mushroomed because it built its business on unrealistic undercutting and blacklisting?“Has the company mushroomed because it built its business on unrealistic undercutting and blacklisting?
“Why did the government continue to hand over public money to a company that had issued repeated profits warnings?”“Why did the government continue to hand over public money to a company that had issued repeated profits warnings?”
Labour’s Rebecca Long-Bailey also called for a ‘full investigation’ into the debacle, saying:Labour’s Rebecca Long-Bailey also called for a ‘full investigation’ into the debacle, saying:
“We’re ... asking for a full investigation into the government conduct of this matter.“We’re ... asking for a full investigation into the government conduct of this matter.
“This company issued three profit warnings in the last six months yet despite those profit warnings the government continued to award government contracts to this company.”“This company issued three profit warnings in the last six months yet despite those profit warnings the government continued to award government contracts to this company.”
Labour has called for an investigation into the Government's actions ahead of the collapse of construction and services company Carillion which has been forced into compulsory liquidationLabour has called for an investigation into the Government's actions ahead of the collapse of construction and services company Carillion which has been forced into compulsory liquidation
Financial analyst and journalist Louise Cooper is also struck by the decision to liquidate Carillion:Financial analyst and journalist Louise Cooper is also struck by the decision to liquidate Carillion:
Fact that it’s a liquidation (winding up) of Carillion and not going into administration (to come out eventually as smaller profitable firm) says a lot oboit underlying financials of firm.#CarillionFact that it’s a liquidation (winding up) of Carillion and not going into administration (to come out eventually as smaller profitable firm) says a lot oboit underlying financials of firm.#Carillion
Britain’s unions says that Carillion’s collapse shows the folly of employing private companies to provide services such as school meals.Britain’s unions says that Carillion’s collapse shows the folly of employing private companies to provide services such as school meals.
Rehana Azam, GMB National Secretary, explains:Rehana Azam, GMB National Secretary, explains:
“The fact such a massive government 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 fact such a massive government 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 now for the Government and administrators is making sure kids in schools still get fed to day - and our members still have jobs and pensions.“The priority now for the Government and administrators is making sure kids in schools still get fed to day - and our members still have jobs and pensions.
“There is no place for private companies who answer to shareholders, not patients, parents and service users in our public services.“There is no place for private companies who answer to shareholders, not patients, parents and service users in our public services.
“What’s happening with Carillion yet again shows the perils of allowing privatisation to run rampant in our schools, our hospitals and our prisons.”“What’s happening with Carillion yet again shows the perils of allowing privatisation to run rampant in our schools, our hospitals and our prisons.”
This is from Sky’s News’s Mark Kleinman:This is from Sky’s News’s Mark Kleinman:
Compulsory liquidation of Carillion is the news we were anticipating over the weekend; effectively means there are no assets to sell so not a conventional administration.Compulsory liquidation of Carillion is the news we were anticipating over the weekend; effectively means there are no assets to sell so not a conventional administration.
My colleague Rob Davies, who has been covering the Carillion story, tweets:My colleague Rob Davies, who has been covering the Carillion story, tweets:
Government will provide funding to ensure no interruption of services provided by Carillion, such as school dinners, hospital cleaning, maintenance of army base homes. Won't be cheap, particularly if it lasts a while.Government will provide funding to ensure no interruption of services provided by Carillion, such as school dinners, hospital cleaning, maintenance of army base homes. Won't be cheap, particularly if it lasts a while.
Less clear what happens to major unfinished projects such as Royal Liverpool and Midland Metropolitan hospital. Not clear joint venture partners are able to take over Carillion's share. https://t.co/gEjfZe5vRPLess clear what happens to major unfinished projects such as Royal Liverpool and Midland Metropolitan hospital. Not clear joint venture partners are able to take over Carillion's share. https://t.co/gEjfZe5vRP
Carillion’s collapse will send shivers through the UK economy.Carillion’s collapse will send shivers through the UK economy.
As well as employing around 20,000 people in the UK, the company also uses thousands of smaller companies to help provide its services.As well as employing around 20,000 people in the UK, the company also uses thousands of smaller companies to help provide its services.
The BBC’s Joe Lynam says these firms must be very nervous...The BBC’s Joe Lynam says these firms must be very nervous...
Thousands of small Carillion subcontractors will be v nervous now that they might not get paid their outstanding invoices. Carillion’s payment terms were often 120days. Will PWC honour those debts?Thousands of small Carillion subcontractors will be v nervous now that they might not get paid their outstanding invoices. Carillion’s payment terms were often 120days. Will PWC honour those debts?
The decision to liquidate Carillion means the government is effectively taking control of the company, says City expert George Trefgarne.The decision to liquidate Carillion means the government is effectively taking control of the company, says City expert George Trefgarne.
Appointment of Official Receiver, answerable to Greg Clarke, means Carillion has effectively been nationalisedAppointment of Official Receiver, answerable to Greg Clarke, means Carillion has effectively been nationalised
ITV business editor Joel Hills calls the situation ‘highly unusual’.ITV business editor Joel Hills calls the situation ‘highly unusual’.
Carillion situation is highly unusual. Liquidation to be handled by the Official Receiver due to high number of government contracts. Not the usual administration process. Company is bust, shares will be suspended from trading at some point.Carillion situation is highly unusual. Liquidation to be handled by the Official Receiver due to high number of government contracts. Not the usual administration process. Company is bust, shares will be suspended from trading at some point.
Rebecca Long-Bailey MP adds that the government must ‘step in immediately’ to keep Carillion’s operations running.Rebecca Long-Bailey MP adds that the government must ‘step in immediately’ to keep Carillion’s operations running.
That will give reassurance to workers that they will be transferred across into potential government institutions that will provide these services.That will give reassurance to workers that they will be transferred across into potential government institutions that will provide these services.
It will also give comfort to those companies in the supply chain that rely on Carillion.It will also give comfort to those companies in the supply chain that rely on Carillion.
"Taxpayer must not lose out" from Carillion going bust - @RLong_Bailey"Taxpayer must not lose out" from Carillion going bust - @RLong_Bailey
Rebecca Long-Bailey, Shadow Secretary of State for Business, Energy and Industrial Strategy, is discussing Carillion’s collapse on BBC Breakfast.Rebecca Long-Bailey, Shadow Secretary of State for Business, Energy and Industrial Strategy, is discussing Carillion’s collapse on BBC Breakfast.
She says the government should give a statement to parliament today, and must also explain why it allowed the crisis to blow up.She says the government should give a statement to parliament today, and must also explain why it allowed the crisis to blow up.
Why did the government not act when profit warnings were issued? Why did they wait until the 11th hour to step in?Why did the government not act when profit warnings were issued? Why did they wait until the 11th hour to step in?
Long-Bailey adds:Long-Bailey adds:
What we don’t want to see happen is the government to take on those contracts which are making a loss, while those contracts that are profitable are simply sold onto another company. That’s not good enough.What we don’t want to see happen is the government to take on those contracts which are making a loss, while those contracts that are profitable are simply sold onto another company. That’s not good enough.
We want all those [public sector] contracts to be brought back into public control.We want all those [public sector] contracts to be brought back into public control.
The Guardian’s Business Today email has expanded its property coverage.The Guardian’s Business Today email has expanded its property coverage.
As well as key news headlines, an agenda of the day’s main events, insightful opinion pieces and a quality feature, there is now more coverage of house prices, mortgages, the rental market – and the best picture galleries from our Money pages.As well as key news headlines, an agenda of the day’s main events, insightful opinion pieces and a quality feature, there is now more coverage of house prices, mortgages, the rental market – and the best picture galleries from our Money pages.
For your morning shot of financial and property news, sign up here:For your morning shot of financial and property news, sign up here:
Carillion’s chairman, Philip Green, says he deeply regrets the decision to put the company into liquidation.Carillion’s chairman, Philip Green, says he deeply regrets the decision to put the company into liquidation.
But he insists there was no other option, after the company’s ‘stakeholders’ (ie, its bankers) declined to provide more short-term financial support over the weekend.But he insists there was no other option, after the company’s ‘stakeholders’ (ie, its bankers) declined to provide more short-term financial support over the weekend.
Here’s the official statement from Green:Here’s the official statement from Green:
“This is a very sad day for Carillion, for our colleagues, suppliers and customers that we have been proud to serve over many years.“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.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.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.
We understand that HM Government will be providing the necessary funding required by the Official Receiver to maintain the public services carried on by Carillion staff, subcontractors and suppliers.”We understand that HM Government will be providing the necessary funding required by the Official Receiver to maintain the public services carried on by Carillion staff, subcontractors and suppliers.”
UK construction giant Carillion has spectacularly collapsed, after attempts to rescue the firm failed, putting thousands of jobs at risk.UK construction giant Carillion has spectacularly collapsed, after attempts to rescue the firm failed, putting thousands of jobs at risk.
In the last few minutes, Carillion has announced that last-ditch talks over the weekend had not been successful.In the last few minutes, Carillion has announced that last-ditch talks over the weekend had not been successful.
Its board have thus concluded that they have ‘no choice’ but to enter compulsory liquidation with immediate effect.Its board have thus concluded that they have ‘no choice’ but to enter compulsory liquidation with immediate effect.
The government will provide funding necessary to keep Carillion’s contracts operating.The government will provide funding necessary to keep Carillion’s contracts operating.
That’s an essential move, given the firm is involved in many public infrastructure projects - from transport and health to education and defence.That’s an essential move, given the firm is involved in many public infrastructure projects - from transport and health to education and defence.
Breaking: Carillion to be put into liquidation with immediate effect after talks with govt and banks fail. Company says government will provide “necessary funding required by the Official Receiver to maintain the public services carried on by Carillion staff”.Breaking: Carillion to be put into liquidation with immediate effect after talks with govt and banks fail. Company says government will provide “necessary funding required by the Official Receiver to maintain the public services carried on by Carillion staff”.
PricewaterhouseCoopers will now be appointed as ‘special managers’ to handle the collapse of the company, which employs over 40,000 people and runs a wide range of public sector contracts.PricewaterhouseCoopers will now be appointed as ‘special managers’ to handle the collapse of the company, which employs over 40,000 people and runs a wide range of public sector contracts.
As we reported last night:As we reported last night:
The Cabinet Office hosted emergency talks on Sunday aimed at mapping out a future for a company that employs 43,000 people – including nearly 20,000 in the UK – but the meeting broke up without a rescue deal being announced.The Cabinet Office hosted emergency talks on Sunday aimed at mapping out a future for a company that employs 43,000 people – including nearly 20,000 in the UK – but the meeting broke up without a rescue deal being announced.
The company’s bank lenders were considering a last-ditch appeal to fund a rescue plan, according to Sky News, but accountancy firm EY is standing ready to manage a potential administration process, which could be triggered as soon as Monday morning.The company’s bank lenders were considering a last-ditch appeal to fund a rescue plan, according to Sky News, but accountancy firm EY is standing ready to manage a potential administration process, which could be triggered as soon as Monday morning.
Carillion’s collapse leaves the UK government facing some tricky questions about why it kept handing the company contracts in recent months, even after a profit warning that showed it was struggling.Carillion’s collapse leaves the UK government facing some tricky questions about why it kept handing the company contracts in recent months, even after a profit warning that showed it was struggling.
It also puts the wider policy of using private sector firm to deliver public services under the microscope.It also puts the wider policy of using private sector firm to deliver public services under the microscope.
As Labour MP Rebecca Long-Bailey tweeted last night, there are a lot of questions to answer....As Labour MP Rebecca Long-Bailey tweeted last night, there are a lot of questions to answer....
(1/3) Government must answer serious questions on their handling of Carillion contracts urgently. They must be prepared to bring public sector contracts back in house to ensure public services, employees, supply chain, tax payers and pension fund members are protected.(1/3) Government must answer serious questions on their handling of Carillion contracts urgently. They must be prepared to bring public sector contracts back in house to ensure public services, employees, supply chain, tax payers and pension fund members are protected.
(2/3) In the last six months Carillion issued 3 profit warnings.In this time Government awarded three separate contracts to Carillion worth nearly £2 billion in total, despite gov policy to designate a company as “High Risk” and reconsider new contracts if profit warning issued.(2/3) In the last six months Carillion issued 3 profit warnings.In this time Government awarded three separate contracts to Carillion worth nearly £2 billion in total, despite gov policy to designate a company as “High Risk” and reconsider new contracts if profit warning issued.
(3/3) it is clear this matter now requires full and transparent scrutiny and it is essential that shareholders and creditors are not allowed to walk away with the most profitable contracts while the taxpayer bails out loss-making parts of the business.(3/3) it is clear this matter now requires full and transparent scrutiny and it is essential that shareholders and creditors are not allowed to walk away with the most profitable contracts while the taxpayer bails out loss-making parts of the business.
We’ll be tracking all the latest developments here....We’ll be tracking all the latest developments here....