Carillion cost: The government is paying millions of pounds a day to keep public sector projects going
Hundreds of Carillion’s public sector contracts are costing the government millions of pounds in temporary funding every day, according to official statistics.
Carillion’s failure just over a week ago prompted the government to step in and use Treasury funds to ensure public sector works continued.
The failed contractor held 450 contracts with the UK government, which represented 38 per cent of £5.2bn of annual revenue reported in Carillion’s last accounts, the Office for National Statistics (ONS) said in a public finances update this morning.
Assuming contracts are not loss-making, this means nearly £2bn of annual revenues falling on the government to fund on a temporary basis: equating to around £5.4m a day, £38m a week, or £165m a month.
On top of this funding, the government is also paying the increased costs of the office of the Official Receiver and a huge team from Big Four accountants PwC, led by its six-strong team of heavy-hitting partners. The figures also do not include the 48-hours of special funding extended to tens of thousands of Carillion’s sub-contractors working on private sector projects.
Carillion fell straight into liquidation after PwC and EY concluded the company had insufficient assets to fund an insolvency. Official witness papers filed by Carillion interim boss Keith Cochrane reported the firm had £29m of cash left in its coffers when it failed, along with £1bn of assets.
Read more: Revealed: Just how bad has it got for Carillion’s small business suppliers?
Bail out
Last week the government insisted the final net cost falling on the taxpayer would only be that of advisers. This is because payments originally made by the government to Carillion will no longer need to be handed over.
Cabinet secretary David Lidington said: “It is regrettable that Carillion has not been able to find suitable financing options with its lenders but taxpayers cannot be expected to bail out a private sector company.”
Today, the ONS specifically referenced the Carillion insolvency under the title: “Recent events that may impact on public sector finances.”
The ONS said:
Following the announcement of the insolvency of Carillion PLC, the government has stated that it will provide the necessary funding required by the Official Receiver to maintain public services. Any impact of these financial interventions on public sector finances will be announced in due course.
Read more: Carillion’s banks were left on the sidelines while shares plummeted