Crisis-hit construction giant Carillion has plunged into liquidation, putting thousands of jobs, pensions and government contracts at risk.
The outsourcer had been locked in crisis talks with its creditors over this weekend but said it had failed to reach an agreement and now “had no choice” but to enter compulsory liquidation.
Chairman Philip Green said: "This is a very sad day for Carillion, for our colleagues, suppliers and customers that we have been proud to serve over many years."
The firm had made “huge efforts” to restructure its balance sheet in recent weeks, he added, but was “unable to secure the funding to support our business plan”.
Carillion said accounting giant PriceWaterhouseCoopers was set to take charge of the liquidation process, while the government will provide “the necessary funding” to maintain the public services it provides.
The collapse could trigger a contagion that could threaten hundreds of its suppliers.
“If it goes under it will be a disaster,” Tony Williams, analyst at Building Value, warned yesterday. “They’ll take a great swathe of companies with them. Hundreds of businesses would be at risk.”
Mr Williams said suppliers could topple as Carillion subcontracts most of its work to trades providing services like glazing, interiors and demolition works. He urged the government to broker a solution: “It’s a real shocker. Carillion supplies the public sector with everything from school dinners, to roads, to HS2. It will cost Britain more if it’s allowed to go bust.”
Bosses at Carillion appealed to the government this weekend to step in and reduce the burden of a string of failed projects around the country, thought to include three public private partnership (PPP) contracts.
The key problem projects are understood to be the building the £350m Midland Metropolitan Hospital in Smethwick, as well as expensive delays in constructing the £335m Royal Liverpool Hospital and a £550m stretch of the Aberdeen bypass.
Carillion was plunged into crisis last Wednesday when its lenders rejected a business plan presented by the firm, amid suggestions it needed £300m of funding by the end of this month.
The banks were expected to meet with Carillion today providing the Government helped relieve some of the pressure on the firm, the BBC reported.
If Carillion goes under it will be a disaster. They’ll take a great swathe of companies with them
Tony Williams, analyst at Building Value
Carillion is working on some of the UK’s largest building projects, including up to £2.2bn worth of contracts on HS2, a £1bn office park around Manchester Airport, an £800m regeneration scheme in Sunderland and the £450m Royal Liverpool Hospital.
It is the UK’s second-largest construction company, employing 43,000 people globally.
Carillion also oversees some of the largest government contracts in the country, in particular for the ministries of justice, transport and defence. It maintains 50,000 homes for the Ministry of Defence, manages nearly 900 schools and is heavily involved in highways and prisons.
A string of profit warnings last year saw the contractor’s share price plummet 93pc as contracts won at wafer-thin margins turned sour. Its shares hit an all-time low on Friday of 14.2p, valuing it at just £61m. The contractor is also buckling under the weight of more than £1.5bn of debt and a huge pension deficit of nearly £600m.
Carillion’s lenders, none the less, put up £140m of new loans last October and it was thrown a lifeline last month when they delayed a test date for its financial covenants until April 30.
Sir Vince Cable, the Liberal Democrat leader, warned this weekend that the Government cannot bail out Carillion as it would allow the “private sector to privatise profits” while the “Government nationalises the losses”, adding that it should not have given the troubled outsourcer contracts in the wake of a string of profit warnings.
He told BBC Breakfast yesterday: “The Government, and particularly the Department of Transport and Network Rail, have been handing out to them very big contracts knowing that they were fragile and there is a degree of recklessness here with public money that we need to have properly investigated.”
Brandon Lewis, chairman of the Conservative Party, told the BBC yesterday that Carillion was still a going concern, adding: “Hopefully, they will be able to work with their partners to get the working capital they need.”
A Government spokesman said: “Carillion is a major supplier to Government so we are continuing to carefully monitor the situation while working to ensure our contingency plans are robust. The company has kept us informed of the steps it is taking to restructure the business.”