Carillion liquidation to price taxpayers £148m

Image: Contractors will be able to service existing debt and overdrafts

By James Sillars, business reporter

The cost of Carillion's collapse to the public purse has been estimated at £148m - and could come in much higher.

That is according to a report examining the government's handling of the stricken construction and outsourcing specialist, which found there was "surprise" at the scale of the company's first profit warning in July 2017.

The National Audit Office (NAO) said that, nevertheless, public contracts that had already been agreed continued to be signed despite the cabinet office raising its risk rating on the company and contingency planning being stepped up.

It said officials were reluctant to attach the highest risk rating to Carillion for fear of tipping the firm into financial collapse.

2:45

Video: MPs attack bosses over Carillion collapse

The NAO described how the company went cap-in-hand to the government in early January of 2018 - asking for £223m to help it through until April.

The report continued: "Rather than provide this, the Cabinet Office decided it was better that Carillion enter into a trading liquidation, because it had serious concerns about Carillion's business plans, the legal implications, potential open-ended funding commitments, the precedent it would set, and the concern that Carillion would return with further requests."

Carillion collapsed on 15 January with debts of £1.3bn, a pensions black hole of £2.6bn that will have to be compensated by the Pension Protection Fund and only £29m cash left on its balance sheet.

3:12

Video: Carillion bosses apologise to MPs for firm's collapse

It employed 20,000 people in the UK and held hundreds of public contracts - from HS2 construction to building schools and providing school dinners.

Almost 12,000 workers have found new jobs but more than 2,300 have been made redundant and 3,000 are still employed on contracts.

Carillion's demise prompted a series of investigations by MPs, who have been damning in their criticism of former bosses while regulators are examining their roles and also those of auditors.

Amyas Morse, the head of the NAO, said: "When a company becomes a strategic supplier, dependencies are created beyond the scope of specific contracts.

2:42

Video: Govt-backed loans for Carillion contractors

"Doing a thorough job of protecting the public interest means that government needs to understand the financial health and sustainability of its major suppliers, and avoid creating relationships with those which are already weakened.

"Government has further to go in developing in this direction."

A cabinet office spokesman responded: "Throughout this process, the government has been clear that its priority is to ensure that public services continue to run smoothly and safely.

"The plans we put in place have ensured this, and we continue to work hard to minimise the impacts of the insolvency, having safeguarded over 11,700 jobs to date.

"We are grateful to the NAO for their report, and will consider their findings."

More from Business

• Thames Water to hand back £120m to customers for leak failures

• PM's headache as Brexiteers raise concern over Irish border plans

• Brexit puts price cap on EU calls and texts at risk, Sky News learns

• 'Exciting step' as test drives of flying car begin

• Amazon to expand UK workforce with 2,500 new jobs this year

• Stobart picks broker amid bid to oust chair

Jon Trickett, shadow minister for the cabinet office, said: "The government's dogmatic commitment to the failed outsourcing ideology blinded it to the large risks.

"The Tories were more concerned about the commercial interests of big business than protecting taxpayers' money or public services."

Original Article

Business

August 28, 2018