Carillion appoints liquidators after rescue talks fail

Carillion has this morning appointed liquidators after crisis talks over the weekend failed to find a solution to save the group.

It plunges into immediate doubt the future of 43,000 jobs worldwide – of which nearly 20,000 are in the UK – as well as facilities management contracts of schools and hospitals, and huge infrastructure projects including HS2.

The construction sector, which was preparing for a subdued 2018, will now wait to see how damaging the impact is on Carillion’s supply chain.

The UK’s second-biggest construction group was in talks all last week with its lenders and stakeholders, including senior members of the Government, and presented a new plan for its future.

It was understood to need £300m in short-term funding from its lenders, which include Santander UK, HSBC and Barclays. However with its debts already approaching £1bn, plus a pension deficit of around £600m, Carillion was unable to agree a deal with its lenders.

An application was made to the High Court for a compulsory liquidation of Carillion early this morning, which will be managed by PwC.

Carillion chairman Philip Green said: “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.”

The Government has already faced criticism for handing a Carillion joint venture HS2 contracts worth £1.34bn in the aftermath of its catastrophic profit warning last July.

That announcement, which revealed a black hole in the company’s accounts, saw chief executive Richard Howson quit and its shares plunge 70% in a week.

Carillion’s share price in 2017

It triggered a crisis which resulted in the group, which had a market value of more than £1bn, being valued at less than £60m on Friday night. The group was also the subject of an investigation by the Financial Conduct Authority into whether it covered up its financial problems and hid them from investors.

Carillion’s problems have been exacerbated by significant issues on major projects, with the £350m Midland Metropolitan Hospital in the West Midlands, the £335m Royal Liverpool Hospital and the £550m Aberdeen bypass contracts named.

Carillion is primarily a construction company, with recent UK projects including the redevelopments of Liverpool FC’s stadium Anfield and Battersea power station.

It also has major facilities management contracts, looking after 50,000 Ministry of Defence homes, 900 schools, 200 operating theatres and 50 prisons.

Rehana Azam, GMB National Secretary, said: “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.”