Carillion Failure Shakes U.K. Construction Sector
David Wagman | January 16, 2018
One of the U.K.’s largest construction companies said January 15 that it would go into compulsory liquidation.
News reports say that an 11th-hour effort to secure a deal with the U.K. government and creditors on behalf of the company, Carillion, failed over the weekend.
The collapse raises fears for the jobs and pensions of 43,000 people employed by the company worldwide, including 20,000 in the U.K. Carillion has around 450 projects with the U.K. government. The company also has a big presence in Canada and the Middle East.
In addition to construction, Carillion provides facilities management and maintenance services such as cleaning and catering in the U.K.’s National Health Service hospitals and maintaining prisons. It holds a number of government contracts, including for the construction of a high-speed rail link and for road maintenance.
Reports say that payment delays from Middle East contracts and overreaching on projects that proved unprofitable led to financial trouble for the company in 2017.
Beginning last July, the company said that it was losing money and its debts were rising. By early January, the company had £900 million ($1.2 billion) in debt and a £587 million ($808 million) pension deficit. As of January 12, the company’s market capitalization had dropped to £61 million, down from £2 billion in 2016.
This morning I heard a story about the surprisingly vast repercussions from this bankruptcy. Not only are critical construction projects -- like two large hospitals and major road construction in Britain, among others -- at risk, food services for hospitals and schools could be jeopardized. Public-private partnerships should have much greater oversight when the consequences of private partner failure are so severe.