Construction company Carillion has recently gone into liquidation stating that they had “no choice but to take steps to enter into compulsory liquidation with immediate effect”. This was after talks which found no other way to deal with the construction giant’s debts.
According to reports, the company had been struggling with debts of around £900 million. Alongside this, they also had a pension deficit of a further £590 million. In the past six months, their shares had also plummeted by 70%. This was after a series of profit warnings were issued and there was a breach of financial covenants.
The company’s chairman described: “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 and the board is very grateful for the huge efforts made by Keith Cochrane, our executive team and many others who have worked tirelessly over this period.”
“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.”
“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.”
But what does this mean for the industry? And for those working under Carillion?
According to The Telegraph, Carillion’s severe financial problems have consequently resulted in them owing money to 30,000 businesses. This equates to approximately £1 billion in unpaid costs! And, as a result of the company’s liquidation, it is now expected that many of these companies that are owed money are likely to go under too.
The SEC Group’s chief executive stated that it was “inexcusable” that the company had “imperilled the supply chain”.
Banks who have lent money to the company could also face a loss of £2 billion. In fact, it has been termed: “one of the most high-profile corporate collapses since the financial crisis.”
The head of Specialist Engineering Contractor, Rudi Klein described that Carillion outsourced the majority of their work. The government, knowing this though, still continued to provide the company with work. He described: “It’s that supply chain who is going to bear the massive loss.”
“There could be a large number of firms that will experience substantial financial distress.”
And, recent news has warned that as of today, companies working for the construction giant on private deals will have just two days of government help.
So what do you think of this? Could you be impacted? Let us know in the comments below.