UK state contractor collapses
One of the British state's biggest contractors collapsed Monday, putting thousands of jobs at risk, after creditors and the government refused to bail out a company struggling under the weight of more than £1.5 billion (US$2.1 billion) of debt.
Carillion said it had no choice but to go into compulsory liquidation after weekend talks with creditors failed to get the short-term financing it needed to continue operating. The construction and services company is working on major public works projects, such as the HS2 rail line in northern England, while also maintaining prisons, cleaning hospitals and providing school lunches.
The company employs 43,000 people worldwide who now face the risk of redundancy. Almost half of them are in the United Kingdom, though Carillion has a presence also in Canada and the Middle East.
Carillion has been struggling to reorganise for the past six months amid debts of about pound900 million (US$1.24 billion) and a pension deficit of £590 million. Carillion's share price has plunged 70 per cent in the last six months.
The UK government refused to rescue Carillion, saying it could not be expected to bail out a private company. In the meantime, it said it would provide the necessary funding to maintain public services.
"It is of course disappointing that Carillion has become insolvent, but our primary responsibility has always been [to] keep our essential public services running safely," said David Lidington, head of the Cabinet Office.
As critics debated the wisdom of contracting out civic services to private entities, Lidington rejected the notion that there would be a fire sale of assets. He said government departments had drawn contingency plans to be activated in the event of a collapse.
In cases of joint partners on a contract, the other partners will take up the slack.
Prime Minister Theresa May's spokesman, James Slack, denied that the government had been taken by surprise by the firm's collapse. He said some of Carillion's 450 public sector contracts might have to be taken over by the government, but there would not be a huge cost to taxpayers.
David Birne, insolvency partner at chartered accountants H W Fisher & Company, said in a statement that it is unusual for a company of Carillion's size to opt for liquidation.
"It suggests there is little, if anything, of value within the company to be saved. Almost every big insolvency in recent years has been a move towards administration rather than liquidation," he said. "For Carillion's 43,000 global staff, liquidation means the immediate risk of redundancy."