Cost of Carillion’s Stalled Hospitals Reaches £2bn

THE TOTAL COST of the two major new hospitals in Birmingham and Liverpool, which failed contractor Carillion had been working on at the time of its collapse, has passed £2 billion.

The contractor, which ceased trading in January 2017, had been building the 646-bed Royal Liverpool and the 669-bed Midland Metropolitan in Birmingham under a private finance initiative deal.

The company’s total liabilities to subcontractors and other creditors reached £7 billion, with thousands losing their jobs when it went under.

Construction problems

A report by the National Audit Office, published today, found that The Royal Liverpool which was due to open in June 2017, is now forecast to be completed more than five years late, in the autumn of 2022 at a total cost of £1.063 billion to build and run compared to the original £746 million.

The taxpayer is currently expected to pay £739 million of this, a reduction of 1% from what was originally planned.

Following the change in contractor, several problems have been found with the work on the Royal, which included all of the building’s cladding needing removing and replacing.

The new construction contractor has also had to strip out three floors of the building and start major work to reinforce the structure with steelwork and additional reinforced concrete.

The Midland Metropolitan, which was originally due to open in October 2018 is now expected to open in July 2022. The cost has risen to at least £988 million to build and run – over £300 million more than the original £686 million.

The taxpayer is currently expected to pay £709 million of this, an increase of 3% from what was originally planned.

Cost to the taxpayer

The private sector has borne most of the cost increase: shareholders, investors, insurers and Carillion have lost at least £603 million on the construction of both projects.

According to the National Audit Office, decisions taken by the government have resulted in increased costs to the taxpayer.

The Department of Health & Social Care (DHSC) paid £42 million compensation to Royal Liverpool’s investors to terminate the PFI contract, when if the actual cost had been known it may not have had to pay anything.

New contractors chosen

The new suppliers for both were chosen without competition. After the termination of the PFI contract, in order to restart the Liverpool project without further delay, the Liverpool Trust agreed contracts with several new suppliers without a public procurement process.

The Sandwell and West Birmingham Hospitals NHS Trust ran a public procurement for the contract to complete Midland Metropolitan taking 15 months, which only attracted one viable bidder.

Gail Cartmail

Unite assistant general secretary Gail Cartmail said: “The report makes for grim reading and endorses what hospital patients and NHS staff in Liverpool and the West Midlands already knew.

“Two desperately needed hospitals are going to be years late and in the meantime local communities are left with facilities that are no longer fit for purpose.

“The responsibility for these delays has to lie squarely at the door of the government, which consistently failed to prioritise the overriding need that these hospitals had to be built.

“While the report notes the financial cost of the projects the human cost of the delays of completing the hospitals has not been recognised.”

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