British construction group Carillion announced its immediate liquidation Monday after the heavily-indebted company failed to secure a financial rescue from the UK government and banks in last-ditch talks. Carillion, which employs 43,000 staff worldwide including 19,500 in Britain, said that the 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," company 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." Carillion is a major UK government contractor involved in a wide range of projects from schools to the multi-billion-pound High Speed Two (HS2) railway. But it has been struggling for some time and in July last year issued the first of several profit warnings.
Carillion on Monday said "it had no choice but to take steps to enter into compulsory liquidation with immediate effect". It added: "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."
Despite the red flags, the government continued to award the company major public contracts, including on the flagship HS2 project, leading to criticism. But the Conservative government of Prime Minister Theresa May said it wasn't its place to prop up the company. "This is a private sector company, it's regrettable that it's not been able to find a suitable refinancing option with its lenders," Cabinet Office minister David Lidington told BBC radio.
"We did decide that taxpayers can't be expected to bail out of a private sector company, particularly when their troubles arose the most part from a side of their business that's nothing to do with UK government contracts," he added Monday. The government meanwhile advised Carillion staff to still come to work to see through some projects.
Union leaders blamed both the government and Carillion management for the company's collapse. "The blame for this lies squarely with the government who are obsessed with out-sourcing key works to these high risk, private enterprises," said Mick Cash, general secretary of the Rail, Maritime and Transport union.
Jim Kennedy, a senior official at the Unite union, called for a public inquiry and said there were "serious questions that need to be asked and answered about Carillion's conduct", while he questioned also why the government handed "public money to a company that had issued repeated profits warnings". Andrew Adonis, who resigned as head of a government-backed infrastructure commission last month, said Sunday that the Carillion crisis raised "big questions" for transport minister Chris Grayling.
Carillion has a wide range of public sector contracts, including providing support services for almost 900 schools and around 50,000 homes for military personnel. The company, with operations also in Canada and the Middle East, had revenues of £5.2 billion ($7.1 billion, 5.9 billion euros) last year. In January, British watchdog the Financial Conduct Authority launched an investigation into its market updates.
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