Carillion crisis deepens amid scramble to save jobs after firm collapses

Thousands of private sector workers at risk and 30,000 small firms owed money may lose out

Workers locked out of Carillion’s Midland Metropolitan hospital construction site.






Workers locked out of Carillion’s Midland Metropolitan hospital construction site.
Photograph: Darren Staples/Reuters

Thousands of staff who worked for the collapsed construction firm Carillion inside private sector companies will have their wages stopped on Wednesday unless their jobs are rescued by other firms, the government has said.

Experts also said up to 30,000 small firms were owed money by Carillion, which crashed into liquidation on Monday morning, with insolvency practitioners reporting an immediate rush of calls from worried business owners.

Q&A

What government contracts does Carillion hold?

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

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Ministers gathered for an emergency meeting on Monday night in an effort to limit the damage caused by the collapse of the sprawling construction and support services business.

As the fallout spread, the Cabinet Office minister, David Lidington, faced mounting pressure over the government’s oversight of the firm’s increasingly precarious finances in the months leading up to its failure.

Lidington told parliament the government would continue to pay those among Carillion’s 19,500 UK staff who work in public sector jobs, such as NHS cleaners and school catering.

But he admitted thousands of Carillion’s private sector workers – who perform jobs ranging from cleaning to catering, security and postroom services for organisations such as the Nationwide building society and BT Openreach – would be cut loose after 48 hours.

“The position of private sector employees is that they will not be getting the same protection that we’re offering to public sector employees, beyond a 48-hour period of grace,” Lidington said.

He added that this would give time for Carillion’s private clients to decide if they wanted to terminate the contracts or step in to cover wages themselves. “I think that is a reasonable gesture towards private sector employees,” he said, adding that a Jobcentre Plus helpline had been set up.

The impact of the company’s implosion was immediately felt on Monday as workers at the Midland Metropolitan hospital – being built near Birmingham by Carillion – were locked out and sent home. The hospital, together with another in Liverpool, is at the centre of the problems that have beset the business. Both are substantially delayed and over budget.

In a video released on Monday night, the Labour leader, Jeremy Corbyn, called Carillion’s collapse a “watershed moment”, adding that it was “time to put an end to the rip-off privatisation policies that have done serious damage to our public services and fleeced the public of billions of pounds”.

Vince Cable, the Liberal Democrat leader and former business secretary, said: “The government has mismanaged contracts so that fat cat bosses are able to get away with millions, hedge funds are able to make millions, while their jobs are at risk.”

The shadow Cabinet Office minister, Jon Trickett, asked Lidington why Carillion was not overseen by a crown representative – a monitor usually appointed to observe government suppliers in financial difficulty – during the three months leading up to its liquidation.

He said that “the House will conclude [the Cabinet Office] was recklessly complacent”.

Earlier, the civil service chief executive, John Manzoni, told the public administration and constitutional affairs committee, which is now to launch an inquiry into outsourcing, that the crown representative was “rotated out” over the summer.

Manzoni said it was not until November that officials “really started to notice” the problems at Carillion, whose chairman, Philip Green, was an adviser to the prime minister on corporate responsibility until December 2016. Between July and November, Carillion issued three major profits warnings and its shares crashed by 91%.

However, Manzoni insisted that a team watching events at the company had “played a blinder”.

While Carillion’s private sector staff face uncertainty over their pay, the company’s former chief executive Richard Howson is still currently entitled to a £660,000 salary, even though he quit in July over the company’s dismal performance.

Lidington declined to say whether Howson, paid £1.5m last year, would still get the money but he said official receivers managing the remains of Carillion could impose “severe penalties” on former directors.

The Institute of Directors described a change to Carillion’s pay policy in 2016 which made it harder for the company to reclaim bonuses as “highly inappropriate”.

Amid concern about continuity of public services, the prime minister’s official spokesperson said the government had taken steps to make sure services were delivered “as normal”.

But within hours of the firm’s collapse, reverberations from its demise were being felt around the country. Firefighters in Oxfordshire were put on standby to serve school dinners, while the RMT rail workers’ union said disruption to train cleaning services was “almost inevitable” because mobile cleaning crews who travel by van found that fuel cards issued by Carillion to pay for petrol no longer worked.

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How are you being affected by the Carillion liquidation crisis?

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After workers building the £590m Midland Metropolitan hospital in Smethwick were told to go home, the West Midlands mayor and former John Lewis boss Andy Street said a new contractor would have to be found, adding that he had set up a regional taskforce to help staff and suppliers.

Liverpool mayor Joe Anderson said “solid contingency plans” were in place to make sure the £490m Royal Liverpool University hospital was not further delayed.

Small business experts warned Carillion’s suppliers could be driven under if they were not paid. Suzannah Nichol, chief executive of trade body Build UK, said she estimated Carillion owed money to between 25,000 and 30,000 businesses which could now struggle.

“Looking at previous cases where large contractors have collapsed, you typically see that around 17% or 18% of businesses who are creditors […] don’t make it through the next five years,” she warned.

Insolvency firm Mazars said it was already fielding calls from affected Carillion suppliers.

Conrad Pearson
(@conrad_pearson)

We are already receiving calls of suppliers affected by the collapse of Carillion

January 15, 2018

Major partners on key Carillion projects admitted they were bound to take a financial hit from picking up its share of projects.

Construction firm Balfour Beatty, which is working on the £550m Aberdeen bypass, said it expected the collapse to cost it £45m, with partner Galliford Try sharing costs that could reach £80m.

But Serco, which provides some of the same services as Carillion, saw its shares rise more than 7% on the demise of a major rival. Carillion’s engineering partner on HS2 work, Kier Group, said it would take over Carillion’s share of the rail project.

The Financial Reporting Council, the accountancy watchdog, said it had been “actively monitoring” the situation and would make a statement shortly. Auditor KPMG, which signed off on Carillion’s 2016 accounts, said it had conducted its duties “appropriately and responsibly”.

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How to save the NHS: experts offer their big ideas

Alan Milburn, former health secretary

There is nothing inevitable about a winter NHS crisis. The government has short-changed the NHS and the chickens are now coming home to roost. It is obvious that a long-term funding settlement is needed both for health and social care. It must be allied to a new determination to harness technological advances to make the NHS sustainable.

Advances in genomics will allow the NHS to shift emphasis from diagnosing and treating illness to predicting and preventing ill health. The development of precision medicine will increasingly allow each patient to be treated individually. New mobile and bio-devices will enable us to check – and take greater control over – our health in a way that was not previously possible.

Big data and predictive analytics have the power to transform how we care for people – not least by allowing healthcare professionals to manage workload and patient flow, so helping tackle the problem of delayed discharge of patients from NHS beds into social care, currently a big problem for hospitals.

These kinds of innovations promise a revolution in how healthcare is delivered. The job of government is to provide the resources and reforms that will enable the NHS to harness them for the common good.

Chris Ham, CEO of the King’s Fund

Hospitals are struggling to cope because of rising demand for care from a growing and ageing population. Some of this demand could be met more effectively by greater investment in care in people’s homes and the community. Social care as well as health care must be given priority and shortages of district nurses, GPs, home care staff and others tackled as a matter of urgency.

Pressure on hospitals will only be relieved if they are working as part of well-functioning local systems of care. Silos must be broken down, and health and social care joined up around the populations served. This means integrating care to enable patients to be admitted to hospital quickly and discharged appropriately. It also means investing in prevention to tackle people’s needs before they become crises.

The more fundamental reform that’s needed is a new health and social care settlement fit for the 21st century. The Barker Commission set out a blueprint in its 2014 report, arguing for a single health and social care budget funded mainly through taxes. Successive governments have ducked this issue and the 70th anniversary of the NHS is the right time to put care services on a sustainable footing for the future.

Shirley Cramer, chief executive of the Royal Society for Public Health

Public health and prevention are the key to the survival of the NHS. Investing in population health and preventing disease is highly cost-effective – by reducing future demand on NHS services, preventive measures have the potential to save the NHS billions of pounds.

The ban on smoking in public places is just one example, having been estimated to save the NHS more than £380m a year. Indeed, £1 of investment in public health interventions is found to have a £14 return in savings to the public purse. In the 21st century, most of the big killers, such as lung cancer and heart disease, are preventable. Diabetes alone costs the NHS £10bn a year – money that could be saved by investing in tackling obesity now.

Failure to invest in public health will inevitably lead to falls in life expectancy, widening inequalities and a drastically increased strain on the NHS in the future. While the long-term nature of the investment in public health is not appealing for politicians who want to see immediate benefits, the future of the NHS depends on overcoming this short-sightedness. Public health and prevention are vital to a sustainable health service and, of course, to better health and wellbeing for all.

Jack O’Sullivan, director of his own health innovation consultancy

We need to change the relationship between ordinary people and the NHS because the most dynamic bit of healthcare, the bit that’s the most successful, is self-care. Patients are not just a problem, they’re a resource. Think of all the patients who got fitbits for Christmas. I don’t get the sense the NHS properly engages with the self-care revolution.

Most people see a health professional for about an hour in a year and the other 8,000 or so hours people are looking after themselves. The idea is that instead of the system where you go to a GP and the GP tries to fix you, you build up a relationship where the GP helps you and coaches you to keep well and with that you save the NHS a lot of money. It tackles the cost and care crisis, it changes the NHS from being just a sickness service to a proper health service.

We [O’Sullivan wrote a paper with former health minister Lord Warner in 2014] are suggesting there would be a £10 a month charge [for using the NHS] but there would be exemptions, you wouldn’t lose access to your GP if you couldn’t afford it. You might say why charge? The first reason is it’s expensive to coach well and the other thing is it would make people feel ‘I am entitled to go to the GP even though I’m healthy’.

As told to Haroon Siddique