Hiba Mahamadi 15 January 2018

Government pledges to protect public services following collapse of Carillion

Government pledges to protect public services following collapse of Carillion image

One of the country’s biggest construction and facilities management companies, Carillion, has gone into liquidation after struggling for the last few months.

Wolverhampton-based Carillion, which has scores of local government contracts including Sunderland City Council’s biggest ever regeneration project, announced this morning that it could no longer continue operations and had been forced to enter into liquidation.

The company attempted to stave off liquidation last week by talking to its key stakeholders to reduce debt and ask for short-term financial support, but this offer was rejected over the weekend.

Chairman Philip Green said: ‘Over recent months huge efforts have been made to restructure Carillion to deliver its sustainable future and the board is very grateful for the huge efforts made by Keith Cochrane, our executive team and many others who have worked tirelessly over this period.  

‘In recent days, however, we have been unable to secure the funding to support our business plan and it is therefore with the deepest regret that we have arrived at this decision.’

The company's shares fell sharply last week following reports that lenders had rejected its survival plan.

In October the company announced a whopping £1bn loss for the first half of financial year 2017/2018.

Carillion took remedial action by reducing borrowing, selling its UK healthcare business to facilities management company Serco for £50m and initiated a transformation plan for the business, including making several senior management changes.

It then came under scrutiny by the Financial Conduct Authority (FCA) last week in connection with statements published between December 2016 and July 2017. 

The shadow communities secretary, Andrew Gwynne, expressed concern that many local authorities have contracts with Carillion and urged councils to bring their outsourced services back in-house.

Mr Gwynne said: 'The Government must offer urgent support to councils to ensure that staff have some certainty over their future and that contingency measures are immediately put in place to ensure the seamless provision of services.'

However, the Local Government Association (LGA) has painted a different picture and said that only a 'relatively small number' of councils are affected by the collapse of the firm.

A spokesman for the LGA said: 'Councils have been monitoring the situation closely and are implementing contingency plans to keep services running as normally as possible.

'Councils are also working with other public sector partners in their local area to be ready for any wider knock-on effects of Carillion’s failure.'

General secretary of trade union Unison, Dave Prentis, said: 'The Government needs to move quickly to bring these contracts back in-house – to safeguard our services and to protect the many staff in schools, hospitals, local authorities and libraries.'

Local government expert at Anthony Collins Solicitors, Andrew Lancaster, said: 'The news of Carillion’s proposed liquidation has widespread consequences for local authorities across the United Kingdom. 

'Once again, this insolvency shows how over-reliance on big contractors - rather than spreading the risk across a wider pool of partners - can leave the country vulnerable to massive service failures and job losses.

'While it's likely some key public sector contracts will be ring-fenced and supported in some way by the Government, local authorities still need to provide their residents and communities with resilient public services in the coming week.

'This means back up contractors need to be found immediately, requiring huge amounts of time, resource and additional expenditure.

Wolverhampton City Council's deputy leader, Cllr 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.'

Carillion has managed Croydon LBC’s libraries since 2012 and the council today decided to bring the service back in-house.

The council’s cabinet member for culture, leisure and sport, Timothy Godfrey, said: ‘The council has been considering its options over the past few months after it became clear that Carillion was running into difficulties.

'We are determined to protect and boost our libraries for residents now and for generations to come.’

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