Councils left counting the cost of Carillion’s collapse

Local authorities have taken services back in-house and seen regeneration projects come to a halt, following news that Carillion has gone into liquidation.

The second largest construction company in Britain, Carillion had been struggling with debts for some time and collapsed yesterday, despite last-minute talks with stakeholders and banks to save the contractor.

According to the Cabinet Office, the company held approximately 450 contracts with central government departments and agencies. It also provided a range of services to councils, from school meals to regeneration.

Carillion chairman, Philip Green, said it was a ‘very sad day’ for the company.

‘We understand that HM government will be providing the necessary funding required by the official receiver to maintain the public services carried on by Carillion staff, subcontractors and suppliers,’ he said.

A spokesman for the Local Government Association said a ‘relatively small number of councils’ have been affected by the company’s collapse.

‘They have been monitoring the situation closely and are implementing contingency plans to keep services running as normally as possible. Councils are also working with other public sector partners in their local area to be ready for any wider knock-on effects of Carillion’s failure.’

One of Carillion’s highest profile local government contracts was the Siglion regeneration joint venture in Sunderland (pictured).

The partnership between Carillion, Sunderland council and igloo Regeneration was formed in 2015 with the aim of restoring the Vaux site in the city centre, which had been empty since 1999.

Building work started in December 2016 and the development is set to include a 60,000-square foot office building, a a hotel, restaurants and shops.

In a statement, a spokesman for Sunderland council said it has been notified by Carillion’s liquidator that building work on the first phase of the Vaux site has now ‘ceased with immediate effect’.

‘The council is in discussions with Carillion and liquidators PricewaterhouseCoopers regarding next steps and to ensure that work is resumed and the phase one building is delivered as soon as possible.’.

Croydon council has said that it intends to terminate its libraries contract with Carillion and take them back in-house. The company took over the running of Croydon’s libraries in 2012.

‘The council has been considering its options over the past few months after it became clear that Carillion was running into difficulties,’ said Croydon’s cabinet member for culture, leisure and sport, Timothy Godfrey.

‘We are determined to protect and boost our libraries for residents now and for generations to come.’

Oxfordshire council has taken over services provided by Carillion including some school meals and cleaning. Ninety schools in the county are supplied with school meals by the company.

‘Most of the county council’s contracts with Carillion are being transferred back to the county council, following an agreement made last July in response to the council’s changing property and estate needs,’ said the council’s director for property, assets and investment, Alexandra Bailey.

‘However, a few services were continuing until the end of March.’

Labour’s shadow Cabinet Office minister, Jon Trickett, called on the government to act ‘quickly to bring these public sector contracts back in-house’ and ‘ensure employees, supply chain companies, taxpayers and pension fund members are protected’.

‘Given £2bn worth of government contracts were awarded in the time three profit warnings were given by Carillion, a serious investigation needs to be launched into the government’s handling of this matter,’ said Mr Trickett.

‘It is vital that shareholders and creditors are not allowed to walk away with the rewards from profitable contracts while the taxpayer bails out loss-making parts of the business.’

But Cabinet Officer minister David Lidington said ‘taxpayers cannot be expected to bail out a private sector company’.

‘Since profit warnings were first issued in July, the government has been closely monitoring the situation and has been in constructive discussion with Carillion while it sought to refinance its business,’ he said.

‘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.’