The UK's second biggest construction company has collapsed
Talks between UK-based construction firm Carillion, its lenders and the UK government, aimed at saving the firm from collapse, have failed to reach a deal. Carillion has run up huge debts on large contracts which means the UK government will have to step in to provide funding if critical public services run by Carillion are to continue. The company has 43,000 staff worldwide - 20,000 in the UK. It is not clear yet how those staff will be affected. The firm has debts of £1.5bn and a £587m pensions shortfall.
It is heavily involved with public sector projects in the UK as part of the UK government’s often criticised policy of privatising public sector services. Hundreds of smaller firms that are in the supply chain on Carillion led projects will also be affected.
A large number of architects will be affected by Carillion's liquidation. Bennetts Associates recently won work with Carillion on a £6m sports hall near King’s Cross in London, while FaulknerBrowns Architects won planning for a large regeneration scheme in Durham backed by a consortium including Carillion’s property development arm.
Concerns also remain about when Carillion’s much-delayed £335 million Royal Liverpool University Hospital, designed by NBBJ and HKS, will open.
According to the BBC, Rehana Azam, national officer of the GMB union, said: "What's happening with Carillion yet again shows the perils of allowing privatisation to run rampant in our schools, our hospitals and our prisons."
Carillion is involved in major projects such as the HS2 high-speed rail line, as well as managing schools and prisons.
It is the second biggest supplier of maintenance services to Network Rail, and it maintains 50,000 homes for the Ministry of Defence. Carillion chairman Philip Green said it was a "very sad day" for the company's workers, suppliers and customers.
The Government must learn from Carillion’s demise and assess its over-reliance on major contractors, according to the Federation of Master Builders (FMB).
Commenting on the announcement that Carillion is to enter compulsory liquidation, Brian Berry, Chief Executive of the FMB, said: “Carillion’s liquidation is terrible news for all those who work for the company and it will have serious knock-on effects for the many smaller firms in its supply chain, some of which will be in serious financial danger as a result of Carillion’s demise.”
Berry concluded: “Carillion’s liquidation raises serious questions for the Government, not least about its over-reliance on major contractors. The Government needs to open up public sector construction contracts to small and micro firms by breaking larger contracts down into smaller lots. That way, it can spread its risk while also reaping the benefits that come from procuring a greater proportion of its work from a broad range of small companies. Construction SMEs train two-thirds of all apprentices and are a sure-fire way of spreading economic growth more evenly throughout the UK.”
Some of the on-going large scale UK contracts that Carillion operate include:
HS2 Building part of the high-speed rail line between London, Birmingham, Leeds and Manchester
MoD homes Maintains 50,000 homes for the Ministry of Defence
Schools Manages nearly 900 buildings nationwide
Network Rail Second largest supplier of maintenance services
Prisons Holds £200m in prison contracts
Labour, the opposition political party in the UK, have called for a full investigation into the government's dealings with Carillion. They have highlighted three profit warnings issued by Carillion in the last six months . Despite these profit warnings the UK government has continued to grant contracts to Carillion.
Carillion has worked on the £400m Battersea power station revamp in London, the £335m Royal Liverpool University hospital, Birmingham’s flagship library and the expansion of Liverpool Football Club’s main stand at Anfield.
Some of the major construction projects that Carillion are involved with that are still in progress include:
- HS2’s North Portal Chiltern Tunnels to Brackley; and the Brackley to Long Itchington Wood Green Tunnel South Portal (C2 and C3) packages, worth together £1.3bn
- The first phase of the £335m M6 junction 13-15 improvements and the M20 junction 3-5 scheme worth around £92m due to start in March
- Improvement and extension works at hospitals in Liverpool and Birmingham
- £115m East Leeds Orbital Route
- £75m Angel Gardens build to rent scheme for Moda and the first phase of £75m student halls for Manchester University at its Fallowfield Campus
- £60m One Chamberlain Square, Birmingham Paraduse Circus
- £62m Midland Mainline improvement programme. Corby to London
- £60m Lincoln Eastern Bypass
- FARRS phase 2 link road to Doncaster Sheffield Airport
- £10m Heltwate school and £7m Jack Hunt school in Peterborough
- 21-storey Salford Central scheme flats
- £16m Salford New Bailey build to rent scheme
- London £91m Barts Square development
- London Strand £25m flats contract at Arundel Court, Strand
- £37m National Grid powerlines upgrade Canterbury
- £38m overhead transmission line upgrade in Reading area
- £23m Waverley station upgrade in Edinburgh