The British government's emergency Cobra committee met on Monday night in an effort to keep public services going following the collapse of Carillion, a giant construction and outsourcing company. Cabinet office minister David Lidington urged employees on Carillion's public service contracts to continue to go to work, promising that the government would pay their wages.
The Wolverhampton-based company, which employed 43,000 people, including 20,000 in the UK, was forced into liquidation on Monday morning after the government refused to bail it out. It collapsed beneath a mountain of debt worth £900 million and a pension deficit of almost £600 million.
Britain’s second biggest construction firm, it had hundreds of government contracts to provide outsourced services, including maintenance of prisons, hospitals and army bases and providing school meals to children.
“The government are also doing everything they can to minimise the impact on subcontractors and suppliers who, like employees, will continue to be paid through the official receiver. The action we have taken is designed to keep vital public services running, rather than to provide a bailout on the failure of a commercial company. The role of the government is to plan and prepare for the continuing delivery of public services that are dependent on these contracts, and that is what we have done,” Mr Lidington told MPs.
He said the government would ensure that public services run by Carillion are operated in-house or given to other contractors, so that Carillion workers employed on such contracts have a good chance of keeping their jobs. Those on private sector contracts, however, are protected for just two days.
“The position of private sector employees is that they will not be getting the same protection that we’re offering to public sector employees, beyond a 48-hour period of grace,” he said.
Middle East contracts
Ministers stressed that Carillion's difficulties were mostly unrelated to its activities in Britain and were mainly due to problems in receiving payment for contracts in the Middle East. Labour's Jon Trickett asked why the government continued to award new contracts to Carillion after the company had issued profit warnings last year.
“Two-fifths of Carillion’s income is paid by the taxpayer, so when did the government first realise that Carillion was in trouble? After all, it had three chief executive officers in a short space of time, made three separate profit warnings and its stock was already subject to short selling on the stock exchange back in 2015.
“The minister says that the government were monitoring the company, so why did they leave the position of the Crown representative observing Carillion vacant for more than three months? How can they explain that £2 billion worth of government contracts – taxpayers’ money – was awarded despite all the information that has clearly been in the public domain?” he said.
Created in 1999 out of the construction firm Tarmac, Carillion acquired the builders George Wimpey, Mowlem and Alfred McAlpine to become one of the biggest players in the construction industry. It provided facilities management services to everything from railways to libraries, benefiting from a massive expansion in privatisation of public services under successive governments since the 1990s.
With the company’s subcontractors as well as its employees at risk following the liquidation, Mr Trickett said Carillion’s collapse should serve as a wake-up call for the government.
“Is it not time that we reversed the presumption in favour of outsourcing once and for all? After all, this is not about the failure of a single company, but of a whole ideological system of contracting out public services. The government are incompetent in office, reckless with taxpayers’ money and helpless with public services,” he said.
