CARILLION: Axe for 20,000 workers likely and hundreds of suppliers set to go bust
Carillion's 250 Sheffield call centre staff have been told they will be paid after the firm collapsed - but experts have warned all 20,000 UK workers will probably lose their jobs and hundreds of supply chain firms are set to go bust.
Workers leaving the building on Broad Street West, beside Park Square Roundabout, said they had been verbally warned their jobs were at risk but they would be paid in January and to carry on as usual.
But Sheffield lawyer Martin McKervey, of CMS, predicted the entire 20,000-strong UK workforce would probably be axed after directors put the giant company into compulsory liquidation. And hundreds of sub-contractors and suppliers would not get paid - creating a ‘domino effect’ of firms going bust.
The construction and facilities management firm went out of business with debts of £1bn and a £580m pension deficit after the banks refused to lend any more money.
As well as the Sheffield call centre, it is also involved in the Sheffield-Rotherham tram-train and phase two of the link road to Doncaster Sheffield Airport. But a £19m project to build flood defences along a five-mile stretch of the Lower Don Valley in Sheffield is complete, the city council has said.
Mr McKervey said: “I think there’s no doubt those jobs will be lost and if a company was owed money they will not be paid, which will have an impact on the supply chain - and their supply chains. It is a grim picture.”
The directors had no choice but to apply to court for compulsory liquidation because no one would have wanted it due to its huge liabilities, he added.
Finance expert Jill Thomas, of Sheffield-based Future Life Wealth Management, said despite the £590m deficit, pensioners would be paid thanks to the Pension Protection Fund.
She added: “The PPF is strong enough to absorb the Carillion scheme, with members assured their pensions are protected. The current surplus in the PPF is over £6 billion, therefore the Carillion deficit should be easily absorbed, if necessary scheme members should expect the administrators and PPF to enable continuity of payments.”
Sheffield-based consultant John Yates said the firm had gone under owing him £4,000.
He had worked with Carillion since 2004, more recently on bids for huge contracts.
He said the firm had a conscience, with strong green credentials and a commitment to apprentices and training.
But it had been caught out by the immense complexities of 30-year, multi-million pound public private schemes involving thousands of people and had, in some cases, underbid for them. It had also been hit by slow payment for some jobs and faced spiralling costs on others.
He added: “The reality is that tenders are high risk. There will be a lot of firms thinking, ‘there but by the grace of God’.
“It’s been very difficult to get paid, they moved to 90-day terms a while ago and extended that to 120 days more recently. Its future was in the hands of the banks and I think that although it was a tough decision, it’s the right one.”
Sheffield Central MP Paul Blomfield said the collapsed was a potential disaster for 250 workers.
He added: “This is a company that has grown rich on taxpayers’ money through public sector contracts and those at the top have grown very rich indeed. I want to ensure that people in Sheffield don’t lose out as a result of the company’s mismanagement.”
Rotherham MP Sarah Champion, urged the Government to ensure the Rotherham–Sheffield tram-train was not further delayed. The first of its kind in the UK, it will cost about £75m, up from an initial estimate of £15m in 2012. Carillion was working for Network Rail on the job.
She said: “Carillion’s collapse is of course deeply worrying for thousands of employees, many of whom are based in South Yorkshire. The Government needs to be prepared to bring public contracts back into state control and act quickly to provide reassurances to Carillion’s workers.”
A Network Rail spokeswoman said all of Carillion’s work ‘would continue for the time being’ as they worked with the official receiver and special manager to ensure continuity.
“Passengers can be reassured their services will be running as normal today as Carillion’s work for Network Rail does not involve the day-to-day running of the railway.
“Our aim is to ensure, as far as possible, that this news has as little impact as possible on our projects to grow and expand the railway network.”
Cabinet Office minister David Lidington MP said the Government would continue to deliver all of Carillion’s public sector services.
He added: “After meeting with their bankers and lenders, Carillion announced its decision to initiate insolvency proceedings. The Official Receiver has been appointed by the court as liquidator along with partners at PwC that have been appointed special managers.
“Government will provide the necessary funding required by the Official Receiver to maintain public services.
“It is regrettable that Carillion has not been able to find suitable financing options with its lenders but 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. 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.
“We understand some members of the public will be concerned by recent news reports. For clarity – All employees should keep coming to work, you will continue to get paid. Staff that are engaged on public sector contracts still have important work to do.
“Since its inception in the 1990s private finance has helped to deliver around £60 billion of much-needed capital investment in infrastructure in the UK across a range of projects and we will continue to maintain partnerships with responsible firms in future.”