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Carillion: ministers fast-track inquiry into directors' conduct

Simon Goodley and Julia Kollewe
Building subcontractors, working for MJ Hillson, remove tools from Carillion’s Barts Square development in central London. Photograph: Bloomberg/Getty Images

The government has asked the Insolvency Service to fast-track an investigation into the conduct of the directors who ran Carillion, the outsourcing firm with scores of government contracts that went into compulsory liquidation on Monday.

The move came as politicians and unions held a series of emergency sessions to discuss the collapse, which has put 20,000 UK jobs at risk.

Greg Clark, the business secretary, said: “It is important we quickly get the full picture of the events which caused Carillion to enter liquidation, which is why I have asked the Insolvency Service to fast-track and broaden the scope of the Official Receiver’s investigation.


NHS
•Manages facilities including 200 operating theatres and 11,800 beds
•Makes more than 18,500 patient meals per day
•Helpdesks manage 1.5m calls per year
•Engineering teams carry out maintenance work



Transport
•Building 'smart motorways' – which ease congestion by monitoring traffic and adjusting lanes or speed limits – for the Highways Agency
•Major contractor on £56bn HS2 high-speed rail project
•Upgrades track and power lines for Network Rail
•Major contractor on London’s Crossrail project
•Roadbuilding and bridges




Defence
•Manages infrastructure and 50,000 homes for Ministry of Defence

Education
•Designed and built 150 schools
•Services such as catering and cleaning at 875 schools

Prisons
•Maintenance and repairs at about half of UK prisons

Libraries
•Manages several public libraries in England

Energy
•Building substations, overhead cables and other works for National Grid


“In particular, I have asked that the investigation looks not only at the conduct of the directors at the point of its insolvency, but also of any individuals who were previously directors. Any evidence of misconduct will be taken very seriously.”

The announcement came as Theresa May told her cabinet that the “taxpayer could not be expected to bail out a private company” following the collapse of Carillion, according to her official spokesman.

The prime minister addressed the issue at the start of a meeting of her top team, arguing that a lot of work had gone into trying to find suitable financing options but that had not proved possible.

The spokesman made clear that in the short term the government would ensure that public services carried on operating, but that was simply replicating money that would have gone to the company – rather than pushing up the bill for taxpayers.

They admitted that public money would have to go to paying the receiver. However, a Whitehall source denied the suggestion that the money could run into the hundreds of millions, saying “it will be nowhere near that”.

The moves came as an emergency meeting of the six main unions, whose members are caught up in the collapse, was scheduled for Tuesday afternoon to gauge the number of job losses.

The meeting, called by the TUC, will involve the general unions Unite and GMB, the public service unions Unison and PCS, the transport specialists the RMT, and Prospect, whose members include scientists, engineers and managers.

Meanwhile, government ministers met at Downing Street to discuss the fallout from the collapse amid mounting criticism of their handling of the construction and outsourcing giant’s demise.


Carillion relies on major contracts, some of which have proved much less lucrative than it thought. 

Earlier this year it slashed the value of them by £845m, of which £375m related to major public-private partnerships (PPPs) such as Royal Liverpool University hospital. 

As its contracts underperformed, its debts soared to £900m. 

The company needed a £300m cash injection, but the banks that lent it money refused to put more in. 

The government also refused to step in and bail the firm out. 

That left the company unable to continue trading and forced it to go into liquidation.


The debt-laden company had 450 government contracts, ranging from the HS2 high-speed railway to providing school lunches and maintaining 50,000 homes on military bases, and employed 43,000 people, including 19,500 in the UK.

Ministers are facing questions about how much the liquidation will cost taxpayers. The cabinet meeting on Tuesday morning followed an emergency meeting of ministers on Monday night.

Further jobs are under threat in the supply chain, with as many as 30,000 small firms owed money by Carillion.

Andy Bradley, the managing director of the garden and winter services company Flora-tec, said Carillion owed it almost £1m for gritting and snow-clearing work carried out in November and December at schools, hospitals, prisons and courts.

He said the accountancy firm PricewaterhouseCoopers, which is helping handle the liquidation, told him Flora-tec would be paid only for services carried out since Monday. He had since laid off 10 of his 90 workers and said the firm was unlikely to survive unless the government stepped in with an emergency fund.

Bradley told the Guardian: “We’ve got a profitable business but we can’t trade out of a black hole of £1m.”

The Carillion CV


History – The business was built from the construction division of Tarmac. It was spun out of the Tarmac corporation in 1999 and then acquired rivals, including Mowlem and Alfred McAlpine. It also acquired a number of Canadian businesses.

Base – Wolverhampton

Employs – 43,000 staff (20,000 in the UK)

How the problems emerged – A profit warning on 10 July revealed an £845m impairment charge in the construction division. Months later shares were down more than 70%. There were further profits warnings in September and November.

Major projects – Involved in the construction of numerous high-profile projects, including the GCHQ ; the Beetham Tower in Manchester; London Olympics Media Centre; Rolls Building courts complex in London; Heathrow Terminal 5; Library of Birmingham; Liverpool FC’s Anfield stadium expansion; the Battersea Power Station redevelopment; and work on HS2.

Government contracts – School meals and cleaning at nearly 900 schools, maintenance contracts at half of the UK’s prisons, managing 200 operating theatres and traffic monitoring systems for the Highways Agency.


He said he felt “duped and betrayed” by the government, which had been awarding Carillion new contracts despite the company issuing two profit warnings last summer. “This sent out the message that Carillion was sound.”

The engineering firm Van Elle warned of a £1.6m hit if it failed to claw back money owed by Carillion. The group, which worked with Carillion on several contracts to carry out rail improvement and maintenance work for Network Rail, highlighted a further £2.5m of revenues linked to contracts with Carillion.

A FTSE 250 company, John Laing Infrastructure Fund, said it was rolling nine Carillion projects on to new providers.

The TUC has called for the government to assemble a national taskforce to deal with the crisis.

Frances O’Grady, the general secretary, said: “We urgently need a national taskforce involving unions to safeguard jobs, services, and pensions.

“Workers can’t be left at the back of the queue. Each and every worker at Carillion needs to know where they stand. They have bills and mortgages to pay, and deserve certainty on their future.

“And we have to ensure that there aren’t more Carillions on the horizon. That means an immediate risk assessment of all large outsourcing firms with government contracts. Public services are already under pressure, and can’t take another hit like this.”

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