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Carillion liquidation: Taxpayers face 'raw deal' as staff urged to keep working - live updates Carillion liquidation: Taxpayers face 'raw deal' as staff urged to keep working - live updates
(35 minutes later)
Carillion’s army of workers are suffering a ‘terribly time’ today, says UNISON general secretary Dave Prentis.
“Staff need assurances about whether they have a job, who will pay their wages, and what’s going to happen to their pensions.
“The government needs to move quickly to bring these contracts back in-house – to safeguard our services and to protect the many staff in schools, hospitals, local authorities and libraries.
“It’s disgraceful that Carillion was lining the pockets of its shareholders, even though the company’s future was increasingly uncertain.
Prentis also fears that taxpayers will pick up the bill for the company’s failure.
“Crucial public services have been put at risk, and the taxpayer is going to be stuck picking up the bill for yet another failed privatisation experiment.
“Carillion holds key contracts across the health service – with the current winter pressures, staff shortages and underfunding, further uncertainty puts the NHS in a precarious position.”
Last week, my colleague Aditya Chakrabortty warned that the Carillion crisis could have a major impact on the UK:
This is a firm that employs just under 20,000 workers in Britain – and the same again abroad. It has a huge chain of suppliers – and its habit of going in for joint ventures with other construction businesses means that a collapse at Carillion would send shockwaves through the industry and through the government’s public works programme.
To see what this means, take the HS2 rail link, where Carillion this summer was part of a consortium that won a £1.4bn contract to knock tunnels through the Chilterns. If Carillion goes under, what happens to the largest infrastructure project in Europe?
What happens to its partners on the deal, British firm Kier, and France’s Eiffage? The project will need to be put back and the taxpayer will almost certainly have to step in.
The decision to put Carillion into a full-blown compulsory liquidation shows how little value was left within the company.
David Birne, insolvency partner at chartered accountants H W Fisher & Company, says it is ‘extremely rare’ move for a company of Carillion’s size - and bad news for its staff.
Birne warns:
“For Carillion’s 43,000 global staff, liquidation means the immediate risk of redundancy.
“For Carillion it will mean huge breach of contract penalties that could dwarf anything demanded of it by creditors.
“And there will undoubtedly be a knock-on effect for companies that supply Carillion that will go all the way down the supply chain to the smallest firms.
Andy Street, the former John Lewis boss who became the first mayor of the West Midlands last year, is setting up a taskforce to support employees of Carillion and subcontractors affected by the company’s collapse.
The taskforce will involve the Black Country chambers of commerce, city council, Local Enterprise Partnership and West Midlands combined authority.
“We don’t yet know how many of those staff will transfer as some parts of the business hopefully are sold on,” said Street.
He adds:
“We’ll want to make sure as much cash as can be raised is raised, so that small businesses who are subcontractors are paid as much as possible and the contagion is limited.
“It’s good news that the Carillion contracts for public services have got a commitment that they will be secured, whether it’s schools or prisons services, that’s taken care of and it’s right that’s the first priority”.
Street is on his way this morning to the Midland Metropolitan hospital, a major unfinished project that was among those that went wrong for Carillion.
Responding to uncertainty about its future, Street said:
“We don’t know the contractual arrangements but we’ll be pressing, given how critical it is to the West Midlands. We’ll be looking for a new contractor so it continues to be built.”
Construction firm Galliford Try has issued a statement.... revealing that it also faces a financial hit from Carillion’s demise.
Galliford says:
The Group is in joint venture with Carillion and Balfour Beatty on the £550m Aberdeen Western Peripheral Route contract. The terms of the contract are such that the remaining joint venture members, Balfour Beatty and Galliford Try, are obliged to complete the contract.
Our current estimate of the additional cash contribution outstanding from Carillion to complete the project is £60-80 million, of which any shortfall will be funded equally between the joint venture members.
Galliford’s shares are down by almost 4% this morning, at the bottom of the FTSE 250.
Balfour Beatty are down 2.3%, after revealing it faces a hit of £35m to £45m.
Just in: Cabinet Office minister David Lidington will give a statement to the House of Commons later today on the collapse of Carillion.
Statement confirmed on #Carillion from @DLidington today in @HouseofCommons
Simon Underwood, business recovery partner at accountancy firm, Menzies LLP, also fears that small firms employed by Carillion could now collapse.
Underwood expects Carillion’s operations to keep running, probably propped up by government cash (ie, the taxpayer).
But the liquidation could be ‘long and messy’, which could drag small firms under.
Underwood says:
“Carillion’s liquidation will have a significant impact on its many thousands of employees and on the company’s supply chain, which is likely to comprise a large number of UK-based sub-contractors.....
“Given that the company has now gone into liquidation, sub-contractors and suppliers could experience financial difficulties as a direct result of Carillion’s demise; potentially leading to knock-on insolvencies. If affected in this way, suppliers and sub-contractors should seek professional advice immediately.
Underwood adds that small businesses affected have some options:
It may be possible to ease the cashflow burden by helping them to agree ‘Time to Pay’ arrangements with HMRC and possibly renegotiate terms with their own suppliers, either informally, or through a rescue process like a Voluntary Arrangement.”
My colleague Rob Davies is investigating how Britain’s construction industry is responding to Carillion’s collapse....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 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)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.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?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.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.Amey had been managing these contracts in a joint venture with Carillion, but is now taking up the job alone.
It says: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.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.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.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.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: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):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.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.“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 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.”“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.
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 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.
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:
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.
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.
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.
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.
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:
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. 
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. 
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. 
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:
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.
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.
‘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.
‘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.
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’:
“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.”
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.
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.
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:
“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.
“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.”
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
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.
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
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.
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.
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?