- Carillion placed into liquidation after six-month battle to get on top of its £1.5 billion debt pile.
- Construction giant employs 19,500 people and is a major government contractor.
- The government is stepping in to pay Carillion staff working on government contracts.
LONDON – Crisis-hit construction firm Carillion on Monday announced it is going into liquidation after last-minute talks to save the business over the weekend failed.
Carillion said in a statement on Monday that it “continued to engage with its key financial and other stakeholders, including Her Majesty’s Government (‘HMG’), over the course of the weekend regarding options to reduce debt and strengthen the group’s balance sheet.”
Carillion has a debt pile of around £1.5 billion. RBS, Barclays, HSBC, Lloyds and Santander UK are owed a combined £900 million. The company’s pension scheme also has a £590 million deficit.
Carillion is one of the main contractors for HS2, the government’s flagship infrastructure project, and provides services for schools, the armed forces, and road projects for the Highways Agency.
The company asked for “limited short term financial support, to enable it to continue to trade whilst longer term engagement continued.”
But the talks were unsuccessful and the company has been forced to put itself into liquidation. PwC is expected to be appointed to manage the process.
The collapse puts the future of Carillion’s 19,500 employees at risk and also heaps pressure on the government.
Carillion said on Monday that the government will provide funds to ensure essential government services carried out by Carillion staff will continue. But the government will likely have to negotiate new contracts for all those services in the longer term.
‘A terrible mess’
Carillion was once valued above £2 billion but the revelations about its rising debt sparked a crisis in July last year when it issued a profit warning, suspended its dividend, and said key contracts were losing money as debt rose. Shares collapsed over 60%.
Neil Wilson, a senior market analyst with ETX Capital, said in an email on Monday: “This was a case of bad management and pitching for contracts at any price, but the government and banks could, or maybe 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.”
‘A very sad day for Carillion’
Chairman Philip Green said in a statement on Monday:
“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.
“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.”