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 11:10 · Josie Cox]

‘Too big to fail’

Meg Hillier, chairwoman of the influential Public Accounts Committee has said that Carillion's collapse “raises grave concerns about jobs, the delivery of public services and the way Government conducts its business”.

"The Public Accounts Committee has previously warned of the risks when contractors, paid from the public purse, become too big to fail.”

She says that the Government now faces a stark choice: “bail Carillion out or let public services and projects suffer. Either way, taxpayers will get a raw deal”.

She says that the Government has “serious questions to answer about its role in allowing taxpayers' exposure to escalate to this point”.

[15 January 2018 11:12 · Josie Cox]

Liberal Democrat leader Vince Cable has said that the Government “must now take responsibility for the big contracts run by Carillion, or re-tender them, to keep the supply chain going and protect thousands of jobs”.

"Ministers must minimise the damage to the capacity of the construction industry.

"We also urgently need a parliamentary inquiry into some of the very questionable decisions made in the past few months, not least the award of public contracts to a company that was clearly in danger of collapse.

"The issue of the former chief executive still being paid his salary, plus perks and bonus, is also a reward for failure that has to be looked into."

[15 January 2018 11:54 · Josie Cox]

Economics editor Ben Chu sheds more light on the situation in his explainer.

   

What does Carillion actually do? How much state money has it been receiving? How did it come to this? And what will happen next?

He’s got the answers here. 

[15 January 2018 11:58 · Josie Cox]

Columnist Sean O’Grady argues that the collapse of Carillion lays bare the reality of what is really happening to public service.

“As a nation we either cannot afford the services we demand, including the shiny new hospitals and prisons and the wondrous new rail lines, or we are not willing to pay more taxes to fund these collective ambitions,” he writes. Read his full take here.

[15 January 2018 12:02 · Josie Cox]

‘Effective governance was lacking at Carillion’

Roger Barker, head of corporate governance at the Institute of Directors, says that – while we’re still in the early stages of finding out what went wrong at Carillion – it demonstrates that major providers of public services “must be governed in a prudent manner”.

“Today's outcome suggests that effective governance was lacking at Carillion, and we must now consider if the board and shareholders have exercised appropriate oversight prior to the collapse,” he says.

“There are some worrying signs. The relaxation of clawback conditions for executive bonuses in 2016 appears in retrospect to be highly inappropriate. It does no good to the reputation of UK business when top managers appear to benefit in spite of the collapse of the organisations that they are responsible for.

“Going forward, it may be necessary for Government to consider how it can better monitor the robustness of governance at key contractors."

[15 January 2018 12:22 · Josie Cox]

James Moore, our chief business commentator, asserts in his latest piece that this is “an appalling corporate scandal, one of the worst we have seen since the financial crisis”. 

He asks whether we’ll see anyone on the corporate side pay a price for the failure or whether anyone will be held accountable in any meaningful way.

“After the events of the financial crisis, when almost no one was, I’m not at all sure.”

He also points out that for the full year 2016, the former CEO Richard Howson received a pay packet of £1.5m, including a £245,000 bonus and £346,000 in share based long term incentives, “representing a handy rise on the £1.3m he booked the previous year”. 

[15 January 2018 13:00 · Josie Cox]

Wolverhampton to hold emergency cross-agency city taskforce meeting

The city of Wolverhampton, where Carillion is based, has said that it will hold an emergency cross-agency city taskforce meeting in about an hour to discuss a plan of action.

“There are many issues which still require clarity and we will be identifying and working through them with our city and regional partners, such as the West Midlands Combined Authority, Black Country Chamber of Commerce, Department for Work and Pensions, and Black Country LEP, over the coming hours and days,” it said in a statement.

“We will also be closely monitoring the national position and liaising with colleagues in Government.”

City of Wolverhampton Council deputy leader, Peter Bilson, said: “This is sad news for our city. 

“Carillion is a global brand that has had a strong association with Wolverhampton for decades. Our priority now though is to put in place a robust support plan for local employees and businesses at this very difficult time for them.”

[15 January 2018 13:28 · Josie Cox]

Economics editor Ben Chu has summarised the five urgent questions the Government must answer over Carillion.

Why were public contracts awarded after it was known the company was in trouble? Why was the Government so reliant on a single company? Why was the Carillion chair advising the Government on corporate social responsibility? Why hasn't it been nationalised? And shouldn't this prompt a wider re-think of privatisation?

Read his full analysis here.

[15 January 2018 14:43 · Josie Cox]

Appetite for contracts unspoiled

Carillion won a total of 10 separate contracts worth over £1.3bn after issuing last July’s profit warning that kick-started the chain of events leading to its ultimate demise.

Market research conducted by intelligence company Tussell shows that in the months following that first profit warnings, Carillion was awarded a contract (its portion of which was worth more than £1bn)  to design and build a 50-mile section of the High Speed Two railway.

Tussell found that two contracts, with a total value of £137m, were awarded after Carillion’s second profit warning on 29 September, at which point the beleaguered company also said that it might have to sell shares to bolster the health of its balance sheet.

Also at the end of July, a Carillion joint-venture won contracts worth £158m to supply catering and other services for British military sites. The following month the company was named as the main contractor on a £300m Manchester property development, and in November it won two key contracts with Network Rail.

[15 January 2018 14:46 · Josie Cox]