Mon, 15 Jan 2018 | ADMINISTRATION
UK construction titan, Carillion, is set to go into liquidation; putting thousands of jobs at risk.
The decision comes following talks between the struggling company, its lenders and the government, which failed to produce any meaningful rescue deal. This means the government will now be forced to provide funding to maintain Carillion's public services.
"All employees should keep coming to work, you will continue to get paid. Staff that are engaged on public sector contracts still have important work to do," said government minister David Lidington.
Carillion first ran into difficulty after losing significant sums on big contracts and running up huge debts.
The company is currently involved in a number of major projects, including, the HS2 high-speed railway line, the management of nearly 900 schools nationwide, significant prison contracts and maintaining more than 50,000 homes for the Ministry of Defence.
The chairman of Carillion, Philip Green, said it was a "very sad day" for the company's 43,000 staff, suppliers and customers.
In addition, thousands of current and former staff have money in Carillion pension funds, which have deficit of more than £600m. The funds will now be managed by the Pension Protection Fund.
A spokesperson for the PPF said: "We want to reassure members of Carillion's defined benefit pension schemes that their benefits are protected by the PPF."
Shadow business secretary Rebecca Long-Bailey said Labour has called for a full investigation into the government's dealings with Carillion:
"This company issued three profit warnings in the last six months, yet despite those profit warnings the government continued to grant contracts to this company."
In the wake of this news, a number of Carillion's contracts will be taken on by other company's while others are expected to be renationalised.
Bernard Jenkin, the Conservative chairman of the House of Commons Public Administration Committee, said Carillion's collapse "really shakes public confidence in the ability of the private sector to deliver public services and infrastructure".
He added that there needed to be a change of "mindset" at companies that do a lot of work for the taxpayer.
"You've got to treat yourself much more as a branch of the public service, not as a private company just there to enrich the shareholders and the directors."
"Ironically, Whitehall tends to do contracts with companies that it always does contracts with, because that's the safe thing to do - that's the perception. A great many small and medium-sized companies feel excluded."
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