Roads contractor Carillion goes bust

Carillion has around 450 public contracts but the government wouldn't step in to back the company's £1.5 billion debt pile.

Carillion has public sector or public/private partnership contracts worth GBP1.7 billion, including providing school dinners, cleaning and catering at NHS hospitals, construction work on rail projects such as HS2 and maintaining 50,000 army base homes for the Ministry of Defence.

Carillion's Chairman, Philip Green, said: "This is a very sad day for Carillion, for our colleagues, suppliers and customers that we have been proud to serve over many years".

Carillion, which employs 43,000 people worldwide, including 19,500 in the United Kingdom, said that the British government would nevertheless provide some funding to allow current state projects to continue, following crunch talks over the weekend.

The PwC also had advice to suppliers regarding payments.

With debts and pension obligations outweighing the company's value, it approached the government and its lenders for a bail-out, but failed to reach a deal.

In a statement it said, "We have put in place contingency plans for each of these projects and are working closely with clients so as to achieve continuity of service".

Shareholders have "no prospect of any return", liquidator PricewaterhouseCoopers said in a statement.

One of its contracts registers refers to an ICT services contract for £26m with Carillion which is due to end on March 1 2018.

Julia Harnden, funding specialist at the Association of School and College Leaders, (ASCL) said: "The Government has announced that it will continue to deliver all public sector services following the insolvency of Carillion and this should mean that services provided to schools continue without any problems".

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"Carillion's liquidation raises serious questions for the Government, not least about its over-reliance on major contractors", Berry added.

It has been paid £5 million of the contract and is still owed £200,000 by the council.

The British government provided financial support to Carillion to help win business in the Middle East, most recently in July, shortly before the company's first profit warning.

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. He told BBC: "What is so galling, and is going to anger people so much, is the taxpayer is going to finish up paying a substantial bill for this collapse, while at the same time, the hedge funds have pocketed £300m effectively gambling against government decisions".

How was analysis of due diligence procedures incorporated into decisions to offer Carillion government contracts worth almost £2bn in total following the issuing of the company's first profit warning?

Those contracts had been agreed prior to the profits warning, and the government sought additional reassurances once Carillion's financial state was known, he said.

Carillion's collapse into compulsory liquidation came after weeks of increasingly urgent discussions with the Government and the company's lenders.

The Prime Minister's spokesman insisted the Government had "kept a very close eye" on the firm but admitted there may be "lessons which can be learned".

However, Mr Lidington said current Carillion employees on private sector contracts will only be paid for 48 hours and will not be offered the same protection as those in the public sector.

Richard Beresford, chief executive of the National Federation of Builders, said, "When a major contractor goes into liquidation, it highlights the importance of diversifying those to whom you award contracts".

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