Carillion Collapses as Loans Dry Up

The second largest construction company in the UK has collapsed. Many questions have started to arise as to what will happen with its ongoing projects and employees.

Carillion collapsed due to the weight of more than £1.5 billion in debt. It problems came about from signing risky contract that proved unprofitable and delays in payments in the Middle East.

The biggest question currently is who or what is going to pick up the public contracts of the company – the government or an outsourced provide. One analyst believes the government will have to claim nationalization to certain areas of the company on a temporary basis.

However, when it comes to contracts in which Carillion was involved in a larger consortium with more companies, its role could be possibly taken over by the other companies.

In contracts where Carillion is along as the contractor, the contract might be taken over by another private contractor.

In the past, taxpayers have bailed out companies, with the most recent being during the 2009 financial crisis when Lloyds and RBS were helped.

However, despite opinions in certain places that Carillion could never fail because of its size. The government did not want to step in to prevent it from collapsing.

One minister said that it was regrettable Carillion could not find financing options amongst its lenders, but the taxpayer should not be expected to foot the bill for a company in the private sector.

Sir Vince Cable, the leader of the Liberal Democrats has called on the government to accept responsibility for the big contracts of Carillion or have them re-tendered, to keep continuity in the supply chain. He added that ministers must help minimize the damage.

Carillion employs more than 43,000 people worldwide with 20,000 in just the UK. Included in that are construction workers, hospital cleaners, port staff, prison workers, and workers in utilities and energy.

Where a consortium is involved with Carillion, the staff could be absorbed by other companies, or if some contracts were taken in by the public sector, employees could be employed directly through the government, local governments or health authorities.

However, it remains unclear at this point what will happen to the private sector contracts Carillion has. The company subcontracts some work to firms that are smaller and the subcontractors could be hurt badly due to being small with delays in payments or failed payments threatening their future.



Leave a Reply