Monday 15th January, 2018
Carillion, the UK's 2nd largest construction company has collapsed leaving its 20,000 UK employees with an uncertain future and pension concerns.
The company's 120 days payments terms to its smaller suppliers leaves many more companies and employees at risk along the supply chain. Balfour Beatty has also announced that the collapse could cost them up to £45m.
As several major projects, such as the Royal Liverpool Hospital and Aberdeen by-pass have run into severe delays and financial problems - it seems that lenders lost confidence in the company being able to recover debts.
Questions are now being raised as to why public sector contracts were still being awarded despite 3 consecutive profit warnings. The company currently has 450 public sector contracts, including the flagship, HS2.
However, it seems not to have come as a surprise to some, with Oxfordshire County Council saying that they had been preparing for a potential collapse of Carillion for some time and that provision has already been made to protect services.
It's likely that the Government will either take some contracts back in-house, or re-tender them. Either way, despite the decision to not bail the company out, it's likely the taxpayer will suffer.
Amid calls for a public enquiry, an investigation by the Daily Mail, revealed that prior to the last profit warning in September, company bosses made provision for their bonuses to be protected, and shareholder dividends were still being paid.
Financial analyst, Louise Cooper says that the fact that "it’s a liquidation (winding up) of Carillion and not going into administration (to come out eventually as smaller profitable firm) says a lot about the underlying financials of firm."
The FRC say that they "have been actively monitoring this situation for some time, in close consultation with other relevant regulatory bodies," adding that "they have powers to investigate circumstances relating to audit of Carillion as well as actions of relevant accounting professionals.
Executives from PWC have been appointed as "special managers" to help in the liquidation.