Carillion collapse: 10 things you should know

A general view of Carillion plc offices in Wolverhampton, as the Government said all Carillion staff

A general view of Carillion plc offices in Wolverhampton, as the Government said all Carillion staff should still come to work and "those already receiving their pensions will continue to receive payment", following the construction giant's collapse. PRESS ASSOCIATION Photo. Picture date: Monday January 15, 2018. See PA story CITY Carillion. Photo credit should read: Aaron Chown/PA Wire - Credit: PA

Here are 10 things to know about Carillion:

What does Carillion do?

Carillion is one of the UK's largest construction companies – employing around 43,000 staff globally including 20,000 in Britain – and is known for having worked on the Royal Opera House, the Channel Tunnel, Tate Modern, and the famous doughnut building of the UK's Government Communications Headquarters (GCHQ) in Cheltenham.

But the Wolverhampton-based company also offers many outsourcing services for the public sector, with contracts to provide school dinners, maintain and operate buildings and estates, security and housekeeping, as well as cleaning and catering at NHS hospitals.

MORE: Construction business Carillion goes into liquidationMORE: Construction leaders say smaller firms will pay price for Carillion's collapseWhy is Carillion in so much debt and how did it get this bad?

Carillion – which reported half-year losses of £1.15bn – was struggling under nearly £900m of debt and last year reported a £587m pension deficit.


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The company was forced to issued a string of profit warnings in 2017, after a review of its construction contracts found them to be much less valuable than previously thought, resulting in a £845m write-off.

It prompted the resignation of chief executive Richard Howson, who said the group needed to bolster its balance sheet and was struggling to stay within its borrowing limits.

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In December, the firm struck an agreement with its lenders to defer a crucial financial covenant test, but failed this past week to secure more money from banks and the government that would help keep it afloat.

Why did the government fail to provide funding?

Carillion is believed to have asked the government to provide funds of £20m to help it secure more money from the banks and avoid going into liquidation, but according to the Press Association ministers were unwilling to offer financial support.

While the cabinet office has declined to comment, there are questions as to whether this was an issue of perception, as funding would look like the government was bailing out yet another private firm.

It is a particularly sensitive topic in the wake of the financial crisis when the UK bailed out major lenders including Royal Bank of Scotland (RBS) and Lloyds.

What has the government said?

Cabinet office Minister David Lidington has said it is 'regrettable' that Carillion failed to secure further funding from lenders but warned: 'Taxpayers cannot be expected to bail out a private sector company.

'We remained hopeful that a solution could be found while putting robust contingency plans in place to prepare for every eventuality.

'It is of course disappointing that Carillion has become insolvent, but our primary responsibility has always been keep our essential public services running safely.'

Why were Carillion's problems not caught earlier?

Questions will also be asked of Carillion's auditor, KPMG, which signed off its 2016 accounts.

Last year Carillion asked KPMG to look into 58 contracts following concerns over late payment.

Later in 2017, the Financial Conduct Authority (FCA) opened an investigation into the 'timeliness and content' of announcements made between December 7 2016 and July 10 2017.

It covers a period of turmoil for the HS2 contractor, in which the firm's share price plunged and its chief executive departed following its profit warnings.

What upcoming projects is Carillion involved with?

The HS2 high speed rail project was one of the most high profile on Carillion's plate, though it held approximately 450 government contracts involving the Department for Education, Ministry of Justice and Ministry of Defence.

Over the past six months, the troubled infrastructure giant had secured contracts worth £158m to deliver facilities management services at more than 230 military sites across the north of England, Scotland and Northern Ireland, and two Network Rail contracts to upgrade infrastructure in the Midlands.

The government has been criticised for awarding contracts to Carillion despite its financial difficulties.

Are any projects in jeopardy as a result of the collapse?

A number of Carillion's contracts are likely to be put back out for tender by the government, including HS2, analysts have said.

But there is also the question of how its project partnerships will be delivered despite its liquidations.

For example, construction firm Galliford Try has said Carillion's collapse has left a £60m-£80m hole in a joint venture between the two firms and Balfour Beatty to deliver the Aberdeen Western Peripheral Route road project.

Will anybody lose their job?

The government is set to 'provide the necessary funding' to maintain public services and told workers to turn up as usual, assuring them they will be paid.

While Carillion is set to continue operating 'until further notice', its pending liquidation puts an unclear number of its 20,000 UK jobs as well as international staff at risk.

Those worried about their job have been told that JobCentre Plus 'stands ready' to support any affected employees through its rapid response service.

Staff working directly for liquidated companies will be entitled to redundancy payments.

What will happen to staff pensions?

Retirees already receiving their pensions will continue to receive payments, the government has assured.

But there are around 27,000 staff involved in Carillion's defined benefit schemes which are likely to be transferred to the public Pension Protection Fund, which means eligible staff will only get a to-be-determined portion of their promised pensions.

Carillion had already driven up a £587m pension scheme deficit, according to accounts filed last autumn.

A dedicated helpline has been set up for workers to answer questions and address concerns regarding their pensions: 020 7630 2715.

Which companies stand to benefit from Carillion's collapse?

A number of Carillion's peers stand to gain some of its business as a result of the collapse.

Balfour Beatty's rail and highways business, as well as Kier's highways and telecoms operations could be in line for new work, alongside Serco's facilities management services.

Those firms – as well as Mitie, Interserve, and Mears – 'are likely to form a key part of client contingency/emergency planning' and be 'beneficiaries of market share gain,' according to Peel Hunt analyst Andrew Nussey.

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