Construction firm involved in HS2 collapses

High Speed Rail Construction

High Speed Rail Construction

The construction giant this morning announced that crunch talks over the weekend to drive down debt and shore up its balance sheet had not produced the "short term financial support" it needed.

The company is involved in a host of major United Kingdom 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.

Today, PwC, which is handling the liquidation, said: "The Official Receiver's priority is to ensure the continuity of public services while securing the best outcome for creditors".

He said: 'Alarm bells have been ringing for over six months about the state of Carillion's finances, so the government must come forward and answer questions on exactly what due diligence measures were undertaken'.

Carillion was once valued above £2b but the revelations about its rising debt sparked a crisis in July past year when it issued a profit warning, suspended its dividend, and said key contracts were losing money as debt rose.

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With 450 government contracts Carillion covered a huge range of activities, delivering 32,000 school meals a day to running the building of spy centre GCHQ and also being the biggest manager of military bases.

Cabinet Office Minister David Lidington said there would be no "fire sale" of Carillion assets and the cost of the process to taxpayers would be "considerably less" than an unmanaged collapse.

"Unless told otherwise, all employees, agents and subcontractors are being asked to continue to work as normal and they will be paid for the work they do during the liquidations".

However the government will be under pressure to explain why it continued to hire Carillion for work even as the company ran into financial issues.

"We remained hopeful that a solution could be found while putting robust contingency plans in place to prepare for every eventuality".

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Bernard Jenkin, the Conservative chairman of the House of Commons Public Administration Committee, said Carillion's collapse "really shakes public confidence in the ability of the private sector to deliver public services and infrastructure".

"We understand that some members of the public will be concerned by recent news reports".

Government sources have denied it was a mistake to award the contracts to Carillion, saying to have done otherwise would have worsened its problems.

"Why did the government continue to hand over public money to a company that had issued repeated profits warnings?"

He urged that "crucial" public sector contracts be taken in-house.

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