â€¢ UPDATE: Carillion has put a large accountancy firm on standby to oversee its being placed in administration, Sky News reports today. More below…
Top UK government ministers held crisis talks yesterday with Carillion, the UK’s second largest contractor, which holds key public-sector contracts but is struggling under a £1.5bn debt mountain.
More emergency talks are scheduled today on the pension liabilities of the company, which is feared to be close to collapse.
Meanwhile, mystery shrouds a crunch meeting Carillion held on Wednesday (10 January) with its lenders during which it was due to present a survival plan in hopes of emergency funding.
Also on Wednesday the UK government revealed it had "contingency plans" in place should Carillion go into administration.
This all follows the revelation last week that Carillion is being investigated by the UK’s Financial Conduct Authority over a series of Stock Exchange announcements it made before last July’s profit warning.
Employing 19,500 people in the UK and 43,000 in total around the world, Carillion will today meet the UK’s Pension Regulator and the pension rescue body, the Pension Protection Fund, because included in Carillion’s liabilities is a pension shortfall of £587m.
The week of extraordinary meetings began on Wednesday (10 January) when Carillion presented a business survival plan to its syndicate of banks, hoping for urgent assistance. But shares in the company plunged 15% the following day amid "radio silence" on the results of that meeting, business newspaper City A.M. reported.
Adding to the air of crisis, the government said on Wednesday that it had "contingency plans" in place should anything happen to Carillion, which, with partners, holds more than £2bn worth of contracts for the UK’s planned high-speed railway, HS2, and which manages hundreds of schools.
"We, of course, make contingency plans for all eventualities," Cabinet Office parliamentary secretary Oliver Dowden told the House of Commons on Wednesday in response to a question.
He added: "Members will know Carillion is a major supplier to the government with a number of long-term contracts. We are committed to maintaining a healthy supplier market and working closely with our key suppliers."
Yesterday’s meeting between Carillion and top ministers, new in their posts after a cabinet reshuffle, shows how worried the UK government is about Carillion’s predicament.
The Financial Times broke the story that Carillion met Thursday with Business Secretary Greg Clark, new Justice Minister Rory Stewart, new Transport Minister Jo Johnson and Liz Truss, Chief Secretary to the Treasury, in a meeting convened by Cabinet Office minister David Lidington, BBC News reports.
A spokeswoman for the government declined to comment to the BBC on any specific meetings.
- UPDATE: Also today, Sky News reports that Carillion has put a large accountancy firm on standby to oversee its being placed in administration. Carillion asked EY and PricewaterhouseCoopers to compete for the role as administrator, with EY said to have been lined up by directors, Sky reported. The move is part of contingency planning being undertaken by Carillion as it races to secure approximately £300m of emergency funding by the end of the month.
Image: With partners, Carillion holds more than £2bn worth of contracts for the UK’s planned high-speed railway, HS2 (Carillion)
I was working for Ballast plc when they collapsed in 2003, I feel for the employees at this troubled times and also the supply chain that feeds into the 20,000 UK based staff that works for the company.
I am amazed at some of the comments of the politicians recommending not to support this company but yet they got behind the bankers for a much larger sum when people were creaming off massive bonuses.
Some of the issues that have happened here relates to the forms of procurement, pricing levels and contracts used and being unsustainable and this should be looked at in detail by all procurers.
Remember it won’t be 20,000 direct employees made redundant or TUPE’d over to other businesses its the supply chain that relies on their contracts and being able to survive the cash-flow impacts of a company going into administration and a new provider selected. This could end up with 100,000plus being affected. I know when Ballast went down for much less there was a massive knock on to the local supply chains!
I am not a political person but the government needs to support this business to ensure there are only minimal affects to the industry and maintaining peoples employment.
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