A crisis meeting was held yesterday at No10 by David Ledington, Theresa May’s new minister for the cabinet office, bringing together several government ministers and reflecting the far-reaching consequences if, as is rumoured to be likely, the construction giant, Carillion becomes bankrupt.
Carillion holds public construction contracts with numerous government departments, including transport, defence and justice. It’s involved in HS2, maintenance for schools, hospitals and prisons, new motorways and services for the armed forces.
Carillion employs over 20,000 workers, with thousands more reliant on the company’s future employed in its supply chains.
Carillion has debts and a pension deficit of £1.5 billion but is valued on the stock market at just £100 million. It is possible that the company’s banks will refuse to lend any further money.
Last year, the company warned it would have to write off £800m and suspend its dividend to shareholders, with former CEO Richard Howson resigning.
This week Carillion met with 200 lenders, including RBS, Santander, HSBC and Barclays to discuss its recovery plans. The banks have already delayed their solvency to loan ratio test which should have been applied at the end of 2017.
Carillion’s pension scheme has a deficit of £590m and meetings with the Pension Regulator, government and the pension’s trustees are set to take place today.
All possible options
Unite, the UK’s largest union, is calling on the government to “consider all possible options” including bringing contracts in-house.
Unite says that if the government provides any financial assistance or guarantees loans to Carillion, there must be an assurance that workers in the supply chain are protected. Carillion employs very few construction workers on its new build developments, instead relying on sub-contractors and agency labour.
Unite assistant general secretary Gail Cartmail, said: “The government must consider all options while the future of Carillion hangs in the balance, including bringing contracts back in-house.”
Barry Ashmore, director of Streetwise Subbies has called for the threat of Carillion’s failure to be used as an opportunity to address unfair payment practices by tier 1 contractors in the industry. “Millions of pounds, go unpaid, often forcing subbies to fight disputes and contest onerous claims, as certain main contractors unfairly retain monies paid to them by their clients and the tax payer,” he alleged.
“It seems that it sometimes takes a big name to fail to make people sit up and look at things happening in the industry in a different light,” he added.