British construction and outsourcing services group Carillion PLC yesterday announced its immediate liquidation after the heavily indebted company failed to secure a financial rescue from the British government and banks.
Carillion, which employs 43,000 people worldwide, including 19,500 in the UK, said that the British government would nevertheless provide some funding to allow current state projects to continue, following crunch talks over the weekend.
“This is a very sad day for Carillion, for our colleagues, suppliers and customers that we have been proud to serve over many years,” chairman Philip Green said in a statement.
“Over recent months huge efforts have been made to restructure Carillion to deliver its sustainable future... 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,” he said.
Carillion is a major UK government contractor involved in everything from schools to the multibillion-pound High Speed Two (HS2) rail project.
However, it has been struggling for some time and in July last year issued the first of several profit warnings.
It has also built construction projects such as London’s Royal Opera House, the Suez Canal road tunnel and Toronto’s Union Station.
In July last year it won contracts to build Britain’s new High Speed 2 rail line, a major project that is to better connect London with the north of England.
Carillion yesterday said that “it had no choice, but to take steps to enter into compulsory liquidation with immediate effect.”
“An application was made to the High Court for a compulsory liquidation of Carillion before opening of business today and an order has been granted to appoint the Official Receiver as the liquidator of Carillion,” it added.
Despite the red flags, the British government continued to award the company major public contracts, including on the flagship HS2 project, leading to criticism.
Andrew Adonis, who last month resigned as head of a UK government-backed infrastructure commission, on Sunday said that the Carillion crisis raised “big questions” for UK Secretary of State for Transport Chris Grayling.
Meanwhile, Liberal Democrat party leader Vince Cable called on the British government not to bail out the group.
“Can’t have privatization of profit and nationalization of losses,” he tweeted.
Carillion has a wide range of public sector contracts, including providing support services for almost 900 schools and about 50,000 homes for UK military personnel.
The company, with operations also in Canada and the Middle East, had revenues of ￡5.2 billion (US$7.1 billion) last year.
British watchdog the Financial Conduct Authority this month launched an investigation into its market updates.
The UK government would ensure that services provided by Carillion will continue and the company’s joint-venture partners would be involved, British Minister for the Cabinet Office David Lidington said yesterday.
“Ever since the profit warnings were announced during the course of last year, various government departments that have had business with Carillion have been drawing up contingency plans about how they might respond,” Lidington told BBC radio.
Some contracts handled by Carillion would go to alternative providers and staff would continue to be paid, he said.
Additional reporting by Reuters
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