Carillion crumbles under debt pile: who’s to blame?
Construction giant received £2bn in government contracts despite three profit warnings
The construction company Carillion has collapsed under a £1.5bn debt pile after failing to reach a rescue deal with the Government.
Carillion filed for compulsory liquidation today, raising questions about the fate of the firm’s 43,000 employees - 20,000 of them UK-based - and stoking criticism of the Government’s decision to award contracts to Carillion despite repeated profit warnings.
Calling for an investigation, Labour shadow business secretary Rebecca Long-Bailey said there were “extreme concerns” about why the Tories issued contracts worth a total of £2bn even after it became clear the company was in financial difficulties, the Financial Times reports. Carillion made its first profit warning just days before it was awarded a £1.4bn contract in July to build part of the HS2 rail line, Politico says.
The demise of the 200-year-old business “poses a major headache for Theresa May’s government, which has employed Carillion to work on 450 projects including the building and maintenance of hospitals, prisons, defence sites and the country’s new superfast rail line”, says Reuters.
Carillion’s implosion was blamed on contract delays and a slump in new business that left the construction giant battling a ballooning debt pile, reports The Guardian.
According to the FT, the Wolverhampton-based construction giant has more than £900m in debts and a £587m pension deficit. Sky News says the debts could reach as high as £2bn, and puts the pension fund deficit at £900m, leading to questions about possible corporate mismanagement.
Meanwhile, The Times says Chris Grayling’s position as Transport Secretary should be reviewed: “He has been had, by Stagecoach, Virgin and now Carillion,” the paper says. “Theresa May needs to consider whether it is time this transport secretary left the station.”
However, while “ministers are ultimately responsible”, says HuffPost’s Paul Waugh, “the lack of civil service expertise in dealing with private contractors has been raised repeatedly by some critics”.