Carillion has filed for compulsory liquidation after talks with lenders failed over the weekend.
The government will be providing funding required by the liquidator — known as the official receiver — to maintain the public services carried on by Carillion staff, subcontractors and suppliers, the company said.
Carillion, which has numerous public sector contracts in the UK and employs 43,000 people, 19,500 of them in Britain, held meetings with government figures over the weekend after its bankers refused to provide £300m in new funding without direct intervention from Whitehall.
PwC is expected to be appointed by the courts to act on behalf of the official receiver and handle the liquidation of Carillion’s assets.
Philip Green, Chairman of Carillion, said:
This is a very sad day for Carillion…Over recent months huge efforts have been made to restructure Carillion to deliver its sustainable future…
In recent days however we have been unable to secure the funding to support our business plan and it is therefore with the deepest regret that we have arrived at this decision.
We understand that HM Government will be providing the necessary funding required by the Official Receiver to maintain the public services carried on by Carillion staff, subcontractors and suppliers.
Carillion is saddled with net debts of roughly £900m and a pension deficit of £587m, which hugely outweighed its stock market valuation last week of less than £100m after around a 90 per cent fall in its share price during 2017.
Around 28,000 members of Carillion’s 13 UK pension schemes will now be transferred to the Pension Protection Fund, the industry lifeboat for collapsed companies — one of the largest schemes the PPF has had to take over. Those who are not yet retired will receive 90 per cent of the pension they were expecting, up to a cap, while members who are already receiving their pensions will get the full amount, but may see lower annual increases in future.
The crisis at Carillion was sparked last year when the Wolverhampton-based company warned it was losing cash on key contracts, debt was rising and that it would have to write off £800m and suspend its dividend, leading to the departure of former chief executive Richard Howson.
Angela Rayner, shadow education secretary, said the collapse was another example of the failure of privatisation of public services.
“Carillion employees whose jobs and pensions are at stake should be the main concern, they are blameless in this corporate meltdown,” she said.
The government will face questions in the House of Commons about why it continued to give the group major contracts – including a £1.4bn HS2 deal – even after its first profit warning in July.
Jon Trickett, Labour’s Cabinet Office spokesman, called on ministers to break their silence and outline their contingency plan.
“It is vital for the government to ensure the firm’s public service contracts, employees and public money are protected first,” he said.
Read more about how the crisis has unfolded:
- Ministers face questions over Carillion contracts
- Government holds crunch meeting with Carillion
- UK government prepares for Carillion collapse as creditors hold talks
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