Carillion facing liquidation leaving thousands of jobs at risk

Jon Ashworth

British construction group Carillion announced its immediate liquidation Monday after the heavily-indebted company failed to secure a financial rescue from the United Kingdom government and banks in last-ditch talks.

The company is understood to have partnership contracts worth £1.7 billion, including cleaning and catering at NHS hospitals, construction work on rail projects such as HS2 and maintaining, schools, prisons and army base homes for the Ministry of Defence.

The company said despite considerable efforts, discussions to secure funding have not been successful and has therefore decided to make an application to the High Court for a compulsory liquidation of the business.

Carillion along with its partner Telent, the telecoms systems installation and services' company, also holds engineering and fibre broadband contracts with two major United Kingdom telcos.

Carillion went into liquidation on Monday after running up huge debts. "Staff that are engaged on public sector contracts still have important work to do".

Carillion is part of a consortium that won a GBP1.4 billion contract to help build Britain's High Speed 2 railway on past year.

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Talks were held throughout the weekend between Government ministers and company officials in a bid to keep Carillion in business, but they broke up on Sunday evening without a deal.

Carillion's Official Receiver and its special managers PwC say subcontractors and staff should continue working.

Asked whether it had been a mistake to continue awarding contracts to Carillion, the PM's spokesman said: "Since July, we have kept a very close eye on this, but of course if there are lessons which can be learned, they will be".

It has seen its shares price plunge more than 70% in the past six months after making a string of profit warnings and breaching its financial covenants.

Britain's government refused to rescue Carillion, saying it could not be expected to bail out a private company.

The government said the contract had "a mechanism" for the other joint venture partners to deliver the project. It's failure means the government will have to provide the funding required to maintain the public services supplied by the firm.

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Carillion, which has been in discussions with stakeholders and creditors for almost a week, said these were continuing as it battles for survival following several profit warnings and a first-half loss of more than GBP1 billion ($A2.0 billion).

As critics debated the wisdom of contracting out civic services to private entities, Lidington rejected the notion that there would be a fire sale of assets.

With thousands of jobs and major infrastructure projects on the line, the chairman of the governing Conservatives said ministers were "keeping a very close eye" on the Carillion negotiations and contingency plans were in place.

Carillion bosses have met lenders to discuss options to reduce debts, recapitalise and/or restructure the group's balance sheet.

Unite Scotland spokesman John Clark told BBC Radio's Good Morning Scotland programme: "The problem with construction is that too many workers are employed by agencies and sub-contractors, and numerous jobs done by the major contractors are more a management level or mid-management level, where they'll instruct agents to do the work on their behalf".

"We want to make sure the British taxpayer aren't going to lose out because of the actions of the government and this company", she said.

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