Economy

Fears over hospital care and schools as Carillion on brink of collapse

Fears over hospital care and schools as Carillion on brink of collapse

"It's a very commercially sensitive situation", Conservative Party Chairman Brandon Lewis said on the BBC's Andrew Marr Show on Sunday, when asked about the possibility of a taxpayer bailout.

Carillion is a key supplier to the Government and has contracts in the rail industry, education and NHS.

In an update to the London Stock Exchange on Friday, Carillion said it had met with representatives of its creditor groups to present a business plan.

The talks took place 24 hours after a meeting of ministers from across a multitude of Whitehall departments to discuss contingency plans for its collapse.

"This is a business that is a going concern".

Reports in the United Kingdom, suggest consultancy firm EY is on standby should the talks on Carillion's ability to finance the debt and an additional pension shortfall of $800 million stall.

If it can survive in the short term, Carillion is also working on a plan to swap £1bn or more of its borrowings for new shares in the company, which is one of the Government's most important infrastructure delivery partners. "Looks like another Grayling bailout!"

Jon Trickett MP, Labour's shadow minister for the Cabinet Office, responding to talks on the future of Carillion, said: "It has been clear for months that Carillion has been in difficulty but the Government has continued to hand over contracts to the company even after profits warnings were issued".

Liberal Democrat leader Sir Vince Cable who has said that shareholders and creditors, not taxpayers, should take the financial "hit" of saving struggling construction giant Carillion from collapse.

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Alastair Stewart, a construction and property analyst at Stockdale Securities, said none of the solutions involving the government were "particularly palatable".

"The biggest intervention they could make is actually take a stake in the company as part of raising a large amount of capital, but they'll look back and look at the background of Lloyds and RBS". It is the second largest supplier of maintenance services for Network Rail and is working on scores of major road improvement projects nationwide, including the M6.

It specialises in construction, as well as facilities management and ongoing maintenance.

Since then, its share price has plummeted and it is now worth just £61m. "Hence why banks gave them space till now", but are "much less happy to allow for them to continue".

Carillion's large syndicate of lenders includes Barclays, HSBC and Santander UK, as well as a host of overseas firms.

It also faced payment delays in the Middle East that hit its accounts.

It has worked on high-profile projects, including the Battersea Power station redevelopment and the Anfield Stadium expansion.

"The Board remains focused on seeking to deliver an outcome that will ensure that the Group emerges considerably strengthened and able to continue delivering excellent service to its many public and private sector customers".

Employing almost half its 40,000 global workforce in the United Kingdom - including around 400 at its city centre headquarters in Wolverhampton - the company manages nearly 900 school buildings nationwide - several in Wolverhampton - as well as 50,000 homes for the Ministry of Defence.


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