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You can find the current article at its original source at https://www.theguardian.com/business/live/2018/jan/15/carillion-crisis-liquidation-last-ditch-talks-fail-business-live
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Carillion liquidation: Taxpayers face 'raw deal' as staff urged to keep working - live updates | |
(35 minutes later) | |
My colleague Rob Davies is investigating how Britain’s construction industry is responding to Carillion’s collapse.... | |
Carillion's major partner on the Midland Metropolitan hospital is property company Richardsons, which is refusing to answer questions and referring them to....Carillion. Which doesn't exist to all intents and purposes. Very poor. | |
Carillion's three major UK projects and partners.Midland Metropolitan hospital - Richardsons (no comment)Royal Liverpool University hospital - Pensions Infrastructure Platform (wiil provide statement soon)Aberdeen bypass - Galliford Try (ready to take it on) | |
Former pensions minister Steve Webb is concerned that Carillion has been lavishing its shareholders with dividend payments, rather than tackling its pension deficit. | |
2016 Carillion annual report says dividend ‘has increased in each of 16 years since formation of company’; Is this really acceptable alongside a pension fund deficit over half a billion pounds? | |
Infrastructure business Amey Group says it will take over the delivery of housing service for Britain’s military. | |
Amey had been managing these contracts in a joint venture with Carillion, but is now taking up the job alone. | |
It says: | |
Amey has incorporated joint ventures with Carillion to deliver the Regional Prime and National Housing contracts for the Ministry of Defence (MOD), through the Defence Infrastructure Organisation (DIO). These contracts maintain the MOD estate in the UK. | |
The terms of the joint ventures’ arrangements mean that Amey will continue the services now that Carillion has announced it is entering into immediate compulsory liquidation. Amey is committed to doing this and ensuring continuity of service to the DIO and MOD and the service men and women in the UK. | |
Labour MP Matthew Pennycook says Amey must ensure that military families don’t suffer from Carillion’s demise. | |
I’ll also be seeking reassurance that CarillionAmey, the private contractor responsible for maintenance of armed forces accommodation including those of many service families in #Woolwich, will not be impacted by the problems affecting its parent company. | |
Meg Hillier, chairwoman of the influential Public Accounts Committee, fears that taxpayers face a ‘raw deal’ from the Carillion collapse: | |
Hillier says (via the Press Association): | |
Carillion’s collapse raises grave concerns about jobs, the delivery of public services and the way Government conducts its business. | |
“The Public Accounts Committee has previously warned of the risks when contractors, paid from the public purse, become too big to fail. | |
“Government now faces a stark choice: bail Carillion out or let public services and projects suffer. Either way, taxpayers will get a raw deal. | |
“Government has serious questions to answer about its role in allowing taxpayers’ exposure to escalate to this point.” | |
Carillion workers face a 10% cut to their pensions, because the company’s pension scheme is currently in deficit to the tune of £580m. | |
This pension scheme is likely to be taken over by the Pension Protection Fund. That would guarantee the pensions of those who have already retired, but would also cost current workers at least 10% of their final deal. | |
Tom McPhail of investment service Hargreaves Lansdown explains: | |
“Whilst the PPF provides valuable security, members who have not yet reached retirement should be prepared for a cut to their pension pay outs. | |
This will involve an immediate cut of 10%, plus the possible loss of some inflation proofing; higher earners may be affected by the PPF cap on payouts which currently stands at £34,655.05. An upward adjustment to the cap applies to those members with 20 or more years’ service. | |
Members who have already reached normal retirement age should continue to enjoy 100% of their current pension payments. | |
McPhail adds that resolving Carillion’s pension scheme could take “months or even years”. | |
Newsflash: Construction firm Balfour Beatty says Carillion’s collapse will cost it up to £45m. | Newsflash: Construction firm Balfour Beatty says Carillion’s collapse will cost it up to £45m. |
In a statement to the City, it says: | In a statement to the City, it says: |
Balfour Beatty is in Joint Venture with Carillion on three projects: the Aberdeen Western Peripheral Route, the A14 in Cambridgeshire and the M60 Junction 8 to M62 Junction 20 scheme. | Balfour Beatty is in Joint Venture with Carillion on three projects: the Aberdeen Western Peripheral Route, the A14 in Cambridgeshire and the M60 Junction 8 to M62 Junction 20 scheme. |
Balfour Beatty will continue to work with its customers and will meet its contractual commitments. | Balfour Beatty will continue to work with its customers and will meet its contractual commitments. |
The cash impact to Balfour Beatty is likely to be an outflow in the range of £35m to £45m in 2018. | The cash impact to Balfour Beatty is likely to be an outflow in the range of £35m to £45m in 2018. |
However, rival construction firm Keir Group says it doesn’t expect to suffer a financial hit, even though it works with Carillion on the High Speed 2 project and the Highways England smart motorways programme. | However, rival construction firm Keir Group says it doesn’t expect to suffer a financial hit, even though it works with Carillion on the High Speed 2 project and the Highways England smart motorways programme. |
Keir says: | Keir says: |
We have put in place contingency plans for each of these projects and are working closely with clients so as to achieve continuity of service. | We have put in place contingency plans for each of these projects and are working closely with clients so as to achieve continuity of service. |
Following today’s announcement and after a short period of transition for these contracts, we do not expect there to be an adverse financial impact on the Group arising from these joint venture contracts. | Following today’s announcement and after a short period of transition for these contracts, we do not expect there to be an adverse financial impact on the Group arising from these joint venture contracts. |
Carillion’s former CEO could soon be summoned to parliament to explain what went wrong... | Carillion’s former CEO could soon be summoned to parliament to explain what went wrong... |
Chair of @CommonsPAC, Meg Hillier, says she’s keen to call former Carillion CEO, Richard Howson, to answer MPs questions about why company collapsed. | Chair of @CommonsPAC, Meg Hillier, says she’s keen to call former Carillion CEO, Richard Howson, to answer MPs questions about why company collapsed. |
Accountancy firm PwC has issued a statement, confirming that the High Court has appointed the Official Receiver as liquidator for Carillion. | Accountancy firm PwC has issued a statement, confirming that the High Court has appointed the Official Receiver as liquidator for Carillion. |
Six senior PwC executives will act as ‘special managers’ to assist in the operation. | Six senior PwC executives will act as ‘special managers’ to assist in the operation. |
PwC says staff affected should keep working while the situation unfolds: | PwC says staff affected should keep working while the situation unfolds: |
The Official Receiver’s priority is to ensure the continuity of public services while securing the best outcome for creditors. | The Official Receiver’s priority is to ensure the continuity of public services while securing the best outcome for creditors. |
Unless told otherwise, all employees, agents and subcontractors are being asked to continue to work as normal and they will be paid for the work they do during the liquidations. | Unless told otherwise, all employees, agents and subcontractors are being asked to continue to work as normal and they will be paid for the work they do during the liquidations. |
They also confirm that Carillion’s investors have been wiped out: | They also confirm that Carillion’s investors have been wiped out: |
Unfortunately, as a result of the liquidation appointments, there is no prospect of any return to shareholders. | Unfortunately, as a result of the liquidation appointments, there is no prospect of any return to shareholders. |
Carillion relies on major contracts, some of which have proved much less lucrative than it thought. | Carillion relies on major contracts, some of which have proved much less lucrative than it thought. |
Earlier this year it slashed the value of them by £845m, of which £375m related to major public-private partnerships (PPPs) such as Royal Liverpool University hospital. | Earlier this year it slashed the value of them by £845m, of which £375m related to major public-private partnerships (PPPs) such as Royal Liverpool University hospital. |
As its contracts underperformed, its debts soared to £900m. | As its contracts underperformed, its debts soared to £900m. |
The company needed a £300m cash injection, but the banks that lent it money refused to put more in. | The company needed a £300m cash injection, but the banks that lent it money refused to put more in. |
The government also refused to step in and bail the firm out. | The government also refused to step in and bail the firm out. |
That left the company unable to continue trading and forced it to go into liquidation. | That left the company unable to continue trading and forced it to go into liquidation. |
The government has set up an advice page on the Carillion crisis: | The government has set up an advice page on the Carillion crisis: |
Carillion declares insolvency: information for employees, creditors and suppliers | Carillion declares insolvency: information for employees, creditors and suppliers |
Train drivers’ union ASLEF has added its voice to the chorus of calls for a public inquiry. | Train drivers’ union ASLEF has added its voice to the chorus of calls for a public inquiry. |
Mick Whelan, general secretary of ASLEF, says: | Mick Whelan, general secretary of ASLEF, says: |
‘Naturally, we are thinking of all the workers, in the public and private sectors, who have been impacted by the construction company Carillion going into administration today. | ‘Naturally, we are thinking of all the workers, in the public and private sectors, who have been impacted by the construction company Carillion going into administration today. |
‘We do wonder, though, how and why, after serial profits warnings, contracts came to be awarded to Carillion, particularly in the rail sector by Chris Grayling, and the impact this may have on the future of Crossrail and HS2. | ‘We do wonder, though, how and why, after serial profits warnings, contracts came to be awarded to Carillion, particularly in the rail sector by Chris Grayling, and the impact this may have on the future of Crossrail and HS2. |
‘We echo the request from Rebecca Long-Bailey to bring all public sector contracts back under public control immediately. | ‘We echo the request from Rebecca Long-Bailey to bring all public sector contracts back under public control immediately. |
‘And there needs to be an urgent public inquiry into all aspects of this and a recognition that PFI does not work for the taxpayer, the consumer, or the good of this country.’ | ‘And there needs to be an urgent public inquiry into all aspects of this and a recognition that PFI does not work for the taxpayer, the consumer, or the good of this country.’ |
Carillion’s former boss, Richard Howson, is under fire this morning. | Carillion’s former boss, Richard Howson, is under fire this morning. |
Howson stepped down as Carillion’s CEO last July when it issued a shock profits warning. But he didn’t formally leave the firm until last autumn - and is receiving 12 months pay -- a £660,000 salary and £28,000 benefits. | Howson stepped down as Carillion’s CEO last July when it issued a shock profits warning. But he didn’t formally leave the firm until last autumn - and is receiving 12 months pay -- a £660,000 salary and £28,000 benefits. |
Vince Cable MP, leader of the Liberal Democrats, says Howson’s payoff is an unacceptable ‘reward for failure’: | Vince Cable MP, leader of the Liberal Democrats, says Howson’s payoff is an unacceptable ‘reward for failure’: |
“We urgently need a parliamentary inquiry into some of the very questionable decisions made in the past few months, not least the award of public contracts to a company that was clearly in danger of collapse. | “We urgently need a parliamentary inquiry into some of the very questionable decisions made in the past few months, not least the award of public contracts to a company that was clearly in danger of collapse. |
The issue of the former chief executive still being paid his salary, plus perks and bonus, is also a reward for failure that has to be looked into.” | The issue of the former chief executive still being paid his salary, plus perks and bonus, is also a reward for failure that has to be looked into.” |
Independent columnist Shehad Khan agrees: | Independent columnist Shehad Khan agrees: |
Remarkable that the former chief exec of Carillion has a deal to be paid for 12 months after he resigned. He stood down after Carillion issued a shock profit warning and is still being paid his £660,000 salary and £28,000 benefits. | Remarkable that the former chief exec of Carillion has a deal to be paid for 12 months after he resigned. He stood down after Carillion issued a shock profit warning and is still being paid his £660,000 salary and £28,000 benefits. |
The Federation of Small Businesses has warned that many small UK businesses could be dragged down by Carillion’s failure. | The Federation of Small Businesses has warned that many small UK businesses could be dragged down by Carillion’s failure. |
FSB national chairman Mike Cherry says Carillion made its suppliers wait FOUR MONTHS before paying their bills. | FSB national chairman Mike Cherry says Carillion made its suppliers wait FOUR MONTHS before paying their bills. |
This means that many SMEs are nervously waiting to see if those invoices will still be paid. If not, they could be driven to the wall themselves. | This means that many SMEs are nervously waiting to see if those invoices will still be paid. If not, they could be driven to the wall themselves. |
Cherry says: | Cherry says: |
“It is vital that Carillion’s small business suppliers are paid what they are owed, or some of those firms could themselves be put in jeopardy, putting even more jobs at risk besides those of Carillion’s own employees. | “It is vital that Carillion’s small business suppliers are paid what they are owed, or some of those firms could themselves be put in jeopardy, putting even more jobs at risk besides those of Carillion’s own employees. |
“These unpaid bills may well go back several months. I wrote to Carillion back in July last year to express concern after hearing from FSB members that the company was making small suppliers wait 120 days to be paid. | “These unpaid bills may well go back several months. I wrote to Carillion back in July last year to express concern after hearing from FSB members that the company was making small suppliers wait 120 days to be paid. |
“Sadly these kind of poor payment practices are all too common among some big corporates. Perhaps if they weren’t it would be easier to spot the warning signs of a huge company in financial trouble. | “Sadly these kind of poor payment practices are all too common among some big corporates. Perhaps if they weren’t it would be easier to spot the warning signs of a huge company in financial trouble. |
“When the dust settles on this sorry saga, there is also a wider lesson to learn about the concentration of public contracts in the hands of a small number of very big businesses. Public procurement must be much more small-business friendly, in which it is easier for small firms to navigate the system and the Government should prioritise meeting its target of at least one third of taxpayer-funded contracts going to smaller firms.” | “When the dust settles on this sorry saga, there is also a wider lesson to learn about the concentration of public contracts in the hands of a small number of very big businesses. Public procurement must be much more small-business friendly, in which it is easier for small firms to navigate the system and the Government should prioritise meeting its target of at least one third of taxpayer-funded contracts going to smaller firms.” |
Labour MP Bill Esterson, the shadow business and international trade minister, fears that there could be a ‘massive’ impact: | Labour MP Bill Esterson, the shadow business and international trade minister, fears that there could be a ‘massive’ impact: |
Massive knock on effects through supply chain and impact on smaller firms. If Carillion’s suppliers aren’t paid, they will go bust too with the loss of thousands of jobs. https://t.co/Sj3a1647hk | Massive knock on effects through supply chain and impact on smaller firms. If Carillion’s suppliers aren’t paid, they will go bust too with the loss of thousands of jobs. https://t.co/Sj3a1647hk |
Carillion’s demise has caused shockwaves in Westminster too. | Carillion’s demise has caused shockwaves in Westminster too. |
Lord Adonis, the Labour peer who recently resigned as Theresa May’s infrastructure tsar, says the government has a lot of explaining to do. | Lord Adonis, the Labour peer who recently resigned as Theresa May’s infrastructure tsar, says the government has a lot of explaining to do. |
He suggests we could even be looking at a UK version of Enron - the US energy trader that spectacularly collapsed 15 years ago. | He suggests we could even be looking at a UK version of Enron - the US energy trader that spectacularly collapsed 15 years ago. |
HMG has big questions to answer. Why were they awarding contracts to Carillion after the exposure of its problems in July? What contingency planning did they do for the collapse? 20,000 jobs & huge projects at stake! More Brexit-induced Whitehall paralysis & incompetence. https://t.co/dYZ4XUUWgn | HMG has big questions to answer. Why were they awarding contracts to Carillion after the exposure of its problems in July? What contingency planning did they do for the collapse? 20,000 jobs & huge projects at stake! More Brexit-induced Whitehall paralysis & incompetence. https://t.co/dYZ4XUUWgn |
CARILLION: Shades of a British Enron. Wild overbidding, fast-and-loose & grossly overpaid management, taxpayers taken for a ride, AWOL auditors & pliant/ignorant ministers and officials. This is going to run & run! | CARILLION: Shades of a British Enron. Wild overbidding, fast-and-loose & grossly overpaid management, taxpayers taken for a ride, AWOL auditors & pliant/ignorant ministers and officials. This is going to run & run! |
Labour MP John Mann is calling for public sector contracts to be taken back into public control. | Labour MP John Mann is calling for public sector contracts to be taken back into public control. |
Another privatised company can’t make its contracts work. In MOD for example , simply bring these contracts in house today and the same staff can carry on doing the same job, only without huge profits and overheads being skimmed off. | Another privatised company can’t make its contracts work. In MOD for example , simply bring these contracts in house today and the same staff can carry on doing the same job, only without huge profits and overheads being skimmed off. |
The risk of contagion to other private contractors or public sector contracts is big and real. This is an opportunity to close down expensive, inflexible contracts and bring them back into the public sector. | The risk of contagion to other private contractors or public sector contracts is big and real. This is an opportunity to close down expensive, inflexible contracts and bring them back into the public sector. |
Another Labour MP, Gordon Marsden, says the government has taken its eye off the ball as it wrestled with the UK’s exit from the European Union. | Another Labour MP, Gordon Marsden, says the government has taken its eye off the ball as it wrestled with the UK’s exit from the European Union. |
Govt so obsessed w failing handling #Brexit Ministers ignored warning signs #Carillion- pumped £billions public money into contracts w Tory donor https://t.co/GHRVPmtne8 Carillion workers' pensions/dozens public sector schemes/plans at risk.Major scandal - Public Inquiry needed? | Govt so obsessed w failing handling #Brexit Ministers ignored warning signs #Carillion- pumped £billions public money into contracts w Tory donor https://t.co/GHRVPmtne8 Carillion workers' pensions/dozens public sector schemes/plans at risk.Major scandal - Public Inquiry needed? |