The biggest corporate failure in a decade in Britain was triggered after the financing banks of Carillion withdrew their support from the company. The events forced the U.K. government to mediate and assure that there would be no let-up in public services from school meals to roadworks.
The company had run up debt and pensions liabilities of at least 2.2 billion pounds ($3 billion) due to a slump in new business and delays in costly contracts and this forced the 200-year-old company to go into compulsory liquidation at 0600 GMT.
Britain’s biggest banks, rivals, merchants and smaller suppliers would be hurt by the collapse of the company. The British government has had to make sure that there would be no disruption to public services.
There were 450 projects that Carillion had been entrusted with for government jobs which included the building and maintenance of hospitals, schools, defense sites and a high-speed rail line and the collapse therefore has turned out to be a source of headache for the Theresa May government.
“In recent days 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,” Chairman Philip Green said.
David Lidington, the minister in charge of the Cabinet Office, said that continuance of public services is the priority of the government.
Salaries for the company’s public sector workers would be paid by the government, Lidington said while urging the Carillion staff to continue to work. However, payments for only 48 hours would be paid to workers on private sector contracts.
He added that alternative providers would be allocated some of the contracts handled by Carillion in time.
It was since July that Carillion had been fighting for survival. It was then that the company had revealed that it had written down the value of its contract book by 845 million pounds and was losing cash. The company employs about 20,000 people in Britain and about 43,000 people around the world.
There was pressure on the May government by the Labour Party and unions of not bailing out the company with taxpayer money after the banks refused the latest restructuring plan of the company in recent days.
Over the weekend, there were last ditch talks between ministers, top bankers and company bosses to draw way to save the company.
Banks including RBS, Santander UK, Lloyds, HSBC and Barclays had debts of about 1.6 billion pounds with Carillion. 580 million pounds was the pension deficit of the company.
(Adapted from Reuters.com)