Carillion’s collapse – ministers hold emergency Cobra meeting
The government’s emergency Cobra committee met last night to discuss “the most immediate issues” from Carillion’s spectacular collapse earlier in the day.
Straining under a £1.5bn debt pile, Britain’s second-biggest contractor failed shortly before 7am on Monday morning, after eleventh-hour talks between the government and creditors ended without an agreement.
Cabinet Office minister David Lidington said “vital services” – from school dinners to hospitals, roads to defence – would be kept going.
Days into his new appointment, Lidington urged Carillion staff to turn up to work as normal, promising all public workers they will be paid. Private sector employees will be paid for the next 48 hours he told parliament later on.
Market insiders suggested the January payroll for Carillion’s 20,000 UK workforce could top £100m, the majority of which relates to public sector contracts. However, Lidington insisted Carillion’s shareholders and lenders would bear the “brunt of the losses” rather than the taxpayer shouldering bailout costs.
Carillion’s liquidation, rather than an administration, had surprised many starting the working week. The government’s Official Receiver took the appointment, supported by top partners from accountancy giant PwC – mirroring a process in 2015 when steel giant SSI failed.
Pressure built on the government for its decision in recent months to continue awarding key contracts to Carillion despite a raft of profit warnings. Labour said ministers had handed out £2bn of contracts to Carillion since the summer.
City A.M. yesterday reported £130m of taxpayer money was put at risk after authorities issued an export guarantee to Carillion on 6 July. Four days later Carillion revealed a £845m contract black hole.
Shadow Cabinet minister Jon Trickett said “alarm bells” had been ringing since last summer over the state of Carillion’s finances.
“The government must come forward and answer questions on exactly what due diligence measures were undertaken, before awarding contracts to Carillion worth billions of taxpayers’ money,” he said.
Meanwhile, the Institute of Directors said multi-million pound pay to former top execs at Carillion put the reputation of Britain’s top bosses on the line.
“It does no good to the reputation of UK business when top managers appear to benefit in spite of the collapse of the organisations that they are responsible for,” said IoD corporate governance head Roger Barker.