Carillion collapse - as it happened: Government and unions react as major NHS contractor enters liquidation

Company employs some 20,000 people in the UK and holds contracts for HS2, prisons, the NHS and the armed forces

Brandon Lewis refuses to rule out taxpayer bailout of Carillion on Andrew Marr

One of the Government's most important contractors collapsed into administration on Monday as a result of its lenders refusing to provide any more financial support, raising fears about the future of hundreds of major projects at an already challenging time for the British economy.

Following several days of tense negotiations, the board of construction giant Carillion said that it had “no choice but to take steps to enter into compulsory liquidation with immediate effect’’.

Labour said that it would question the group about how the situation was allowed to become so serious and unions also called for an inquiry into the crisis.

Here's a look back at how all the action unfolded.

Key Points

• Carillion: Government contractor enters compulsory liquidation 'with immediate effect'
• Analysis: How can one of the Government’s biggest contractors go bust?
• Comment:  The collapse of Carillion lays bare the reality of what is really happening to public service
• Carillion won £1.3bn of contracts after profit warning that kick-started demise
• Government to hold emergency COBRA meeting to discuss Carillion's collapse
• Head of corporate governance at the Institute of Directors says ‘effective governance was lacking at Carillion’
• TUC general secretary Frances O'Grady calls collapse a ‘textbook example of the failures of privatisation and outsourcing’
• Tim Roache, GMB general secretary, says ‘ministers should be hanging their heads in shame - it’s a complete shambles’

[15 January 2018 09:46 · Josie Cox]

‘A wider lesson to learn’

Here’s how the national chairman of the Federation of Small Businesses, Mike Cherry, is responding to the Carillion situation:

“It is vital that Carillion’s small business suppliers are paid what they are owed, or some of those firms could themselves be put in jeopardy, putting even more jobs at risk besides those of Carillion’s own employees.

“These unpaid bills may well go back several months. I wrote to Carillion back in July last year to express concern after hearing from FSB members that the company was making small suppliers wait 120 days to be paid.

“Sadly these kind of poor payment practices are all too common among some big corporates. Perhaps if they weren’t it would be easier to spot the warning signs of a huge company in financial trouble.

“When the dust settles on this sorry saga, there is also a wider lesson to learn about the concentration of public contracts in the hands of a small number of very big businesses. Public procurement must be much more small-business friendly, in which it is easier for small firms to navigate the system and the Government should prioritise meeting its target of at least one third of taxpayer-funded contracts going to smaller firms.”

[15 January 2018 09:52 · Josie Cox]

Back in July last year, our chief business commentator, James Moore, already raised questions over whether Carillion should be getting such important contracts, given its financial woes.

“It seems we might have to wait for a truly dreadful crisis, one that really hurts people, for this to change,” he concluded at the time. “It always seems to be that way in modern Britain.”

[15 January 2018 09:56 · Josie Cox]

‘Huge embarrassment for the UK Government’

Fiona Cincotta, senior market analyst at City Index, said that the developments, which put thousands of jobs at risk, are “yet another huge embarrassment for the UK Government, which appears to be moving from mishap to mishap”.

She also pointed out that the fact that Carillion has gone into liquidation rather than administration “scream volumes over the state of the financials at the firm”.

“There were no assets to sell so no administration,” she explained.

[15 January 2018 10:06 · Josie Cox]

‘A complete shambles’

Tim Roache, GMB general secretary, said that Prime Minister Theresa May “must act right now to bring Carillion contracts back into public ownership”.

“That is the only way to safeguard the jobs and services this mess has put at risk.”

He accused the Government of spoon-feeding the company taxpayers’ money by awarding them contracts even after it had issued profit warnings. “Ministers should be hanging their heads in shame today - it’s a complete shambles.” 

[15 January 2018 10:20 · Josie Cox]

‘Win work at all costs’

John Colley, a Professor of practice in Warwick Business School’s Strategy and International Business group, explains the collapse of Carillion like this:

"The problem at Carillion is twofold in that too many contracts were taken at poor margins and terms, which prevented any subsequent profitability under competitive pressure. Some were allocated during the recession when it was win work at all costs.

The other key issue is project accounting, which tends to recognise losses late in the project, effectively when the project starts to run out of money. There will no doubt be serious retrospective scrutiny of the accounting. Balfour Beatty is still recovering from some similar issues, but it did not have the same debt levels and also had key assets to sell. Carillion does not and has a large pension deficit, which almost ensures liquidation as nobody wants that.”

[15 January 2018 10:32 · Josie Cox]

Employees should ‘prepare for the worst’

“Today’s news is undoubtedly distressing for employees of Carillion and their families,” says Hannah Maundrell, editor in chief of money.co.uk.

“Those who fear they will lose their jobs should prepare for the worst - now is the time to check what redundancy rights you have and dig out any income or mortgage protection policies you hold just in case,” she adds.

[15 January 2018 10:36 · Josie Cox]

The Construction Industry Training Board has tweeted that it is taking steps to secure the future of its 1,400 construction apprentices in light of what’s happened to Carillion.

[15 January 2018 10:38 · Josie Cox]

General Secretary of the TUC, Frances O'Grady, meanwhile, has called the collapse of Carillion a “textbook example of the failures of privatisation and outsourcing”.

[15 January 2018 10:45 · Josie Cox]

Liquidation vs. administration?

David Birne, insolvency partner at chartered accountants H W Fisher & Company, goes into a little more detail on the difference between liquidation and administration.

“For a company Carillion's size, it is extremely rare to opt for a liquidation rather than an administration - and a compulsory liquidation at that,” he says.

“It suggests there is little, if anything, of value within the company to be saved. Almost every big insolvency in recent years has been a move towards administration rather than liquidation,” he adds.

“The fact Carillion has opted for a compulsory liquidation suggests the directors of the company may have sought to expedite the process rather than leave their workforce in limbo - and unpaid - for six weeks.

“In this way, at least some of its employees can be moved over to other contractors, particularly where they are working on government contracts, such as HS2 and Crossrail, but there could still be many thousands of workers left looking for a job only three weeks into the New Year.”

[15 January 2018 11:05 · Josie Cox]

Iain McIlwee, CEO of the British Woodworking Federation, has also raised concerns about what this all could mean for smaller companies.

He is urging the Government to develop a “structured and more consistent legislative process to deal with market failures, be they banks, construction firms or steel manufacturers”.

“We cannot rely on arbitrary decision making and political posturing,” he says.