Sunday 4 December 2022

UK construction group Carillion collapses as key talks fail

LONDON, January 15, 2018

The construction firm Carillion, which has key operations in the Middle East region, has gone into compulsory liquidation, putting tens of thousands of jobs at risk, said a report.

A British company, Carillion is involved in a host of major UK government projects such as HS2 ( new high-speed rail network, from London to Birmingham and to Manchester and Leeds), as well as vital public services including school dinners, reported The Guardian.

The company decision came after the last-ditch talks by the bank lenders at the weekend collapsed. The emergency talks were hosted by the Cabinet Office, it stated.

A quality project contractor, Carillion has a major presence in the region, especially in the UAE through its partnership with Emirati conglomerate Al Futtaim and in Oman through its joint venture firm Carillion Alawi.

Al Futtaim Carillion (in which the Dubai group has a 51 per cent stake) provides a broad range of business in building construction, civil engineering works sewerage works and concrete repairs, transport and construction services to commercial and public sector clients in the UAE.

Its Omani joint venture firm Carillion Alawi has been a major player in the sultanate's construction sector for the last 45 years. During the period it has delivered some of the most prestigious projects such as Royal Court Affairs, Zubair Corporation, Petroleum Development Oman, Majid Al Futtaim and The Wave Muscat.

It is currently involved in several big projects including Kempinski Hotel and Apartments; Muscat International Airport - MC2; Oman Convention & Exhibition Centre; BP Khazzan and Saraya Bandar Jissah resort project.

As part of its sweeping changes that followed the resignation of its CEO Richard Howson, Carillion had last year confirmed that it will exit construction markets in Egypt, Qatar, and Saudi Arabia, and it will also no longer take on construction public-private partnership (PPP) projects.

The group had then said that its exit from “non-core” markets and geographies would raise up to £125 million over the next 12 months, while the group strategic review would include further annual cost savings.

On its liquidation move, Carillion in a statement to the London Stock Exchange, said: “Despite considerable efforts those discussions have not been successful, and the board of Carillion has therefore concluded that it had no choice but to take steps to enter into compulsory liquidation with immediate effect.”

An application was made to the high court for a compulsory liquidation of Carillion before the opening of business on Monday and an order has been granted to appoint the official receiver as the liquidator, said the report.

The accountancy firm PricewaterhouseCoopers (PwC) is likely to be named as special manager to act on behalf of the official receiver and handle the collapse of Carillion, which employs 43,000 people worldwide, including nearly 20,000 in the UK.

Balfour Beatty, the international infrastructure group, said it is in joint venture with Carillion on three projects: the Aberdeen Western Peripheral Route, the A14 in Cambridgeshire and the M60 Junction 8 to M62 Junction 20 scheme.
The company pointed out that it will continue to work with its customers and meet contractual commitments.
The cash impact to Balfour Beatty is likely to be an outflow in the range of £35 million to £45 million in 2018, said the company in a statement.
The profit impact of Carillion’s compulsory liquidation would be recorded as an exceptional non-underlying charge in the income statement, it stated.
Balfour Beatty clarified that it does not have any other material financial exposure to Carillion.

Carillion said the government would provide funding necessary to maintain the public services carried out by its staff, subcontractors and suppliers, reported The Guardian.

The government has urged workers to go to work as usual and promised them they would be paid via the official receiver.

Rebecca Long-Bailey, the shadow secretary of state for business, energy and industrial strategy, told BBC Radio 4’s Today programme that big job losses could be avoided “if the government acts quickly and brings contracts back in-house”.

The firm is involved in many public infrastructure projects – from transport and health to education and defence – and provides other vital public services such as cleaning and catering in NHS hospitals, the provision of school dinners in nearly 900 schools and prison maintenance.

The Cabinet Office minister, David Lidington, said some services would be taken in-house while others would be handed to other operators “in a managed, organised fashion”.

He defended the government’s decision not to bail out the company and pointed to contingency plans drawn up following Carillion’s first profit warning in July. This means that contracts were drawn up so that if Carillion failed, other contractors would take over its responsibilities.

Carillion ran into financial difficulties last year after issuing three profit warnings in five months and writing down more than £1 billion from the value of contracts.

Philip Green, the company’s chairman, said: “This is a very sad day for Carillion, for our colleagues, suppliers and customers that we have been proud to serve over many years. Over recent months, huge efforts have been made to restructure Carillion to deliver its sustainable future."

“In recent days, however, 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,” he added.

Tags: Jobs | UK | contractor | Carillion |

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