UK government questioned over Carillion contracts after profit warnings

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UK government questioned over Carillion contracts after profit warnings

By Andrew MacAskill

 

Carillion logos are seen on cranes at a building site in London, Britain January 15, 2018. REUTERS/Peter Nicholls

 

LONDON (Reuters) - Britain's government is under pressure from opposition parties to explain why ministers awarded construction company Carillion 1.3 billion pounds ($1.8 billion) of new contracts after it was known to be in financial difficulty.

 

Carillion collapsed on Monday in one of Britain's biggest corporate failures, throwing hundreds of large projects into doubt and forcing the government to step in to guarantee vital public services.

 

Britain's opposition Labour and Liberal Democrat parties called for an investigation into the government's dealings with Carillion before the company collapsed.

 

Tussell, which runs a database of government contracts in Britain, estimates that Carillion was awarded government contracts worth 1.3 billion pounds after the company issued its first profit warning in July.

 

Jon Trickett, Labour's Cabinet Office spokesman, questioned why the government awarded three contracts to the group last year despite it being government policy to designate a company as "high risk" if it had issued a profit warning.

 

OPPOSITION CRITICISM

 

"Why was it apparent to everone except the government that Carillion was in trouble?" Trickett said in a debate in parliament.

 

The leader of the Liberal Democrats, Vince Cable, called for a public inquiry to examine what he described as "very questionable decisions made in the past few months".

 

Labour Party leader Jeremy Corbyn said that such work should never have been given to the private sector in the first place.

 

He described the collapse of Carillion as a "watershed moment" and said it was time to "end the rip-off privatisation policies that have done serious damage to our public services and fleeced the public of billions of pounds".

 

Carillion's collapse heaps more pressure on Prime Minister Theresa May's shoulders as she grapples with the tortuous negotiations on Britain's exit from the European Union and a deeply divided Conservative Party.

 

One of many private companies to run public services in Britain, Carillion had been fighting to survive after contract delays and a downturn in new business prompted profit warnings.

 

The company's contract to help to build the new HS2 rail line in the north of England was awarded on July 17, a week after it issuing a profit warning in which it noted a deterioration in cash flows.

 

The following day, Carillion won part of a 158 million pound Ministry of Defence contract to provide catering, hotel and mess services at 233 military facilities.

 

Carillion issued a second profit warning at the end of September and about five weeks later was awarded a 62 million pound rail contract.

Cabinet Office minister David Lidington defended the government's handling of the company.

 

The government had been monitoring Carillion closely after the first profit warning and in most cases awarded joint venture contracts so the other company could take over the work if there were problems, he said.

 

Senior government officials told a committee of lawmakers that the government allowed the company to bid for contracts because it would have been illegal to stop it and could have accelerated the company's collapse.

 

"There's an issue here, but that doesn't necessarily mean that the government has to pull all its business because that could then trigger a complete collapse of the company," Cabinet Secretary Jeremy Heywood said.

 

(Reporting by Andrew MacAskill, additional reporting by Elizabeth Piper, graphic by Ritvik Carvalho,; Editing by Guy Faulconbridge and David Goodman)

 

-- © Copyright Reuters 2018-01-16

[smedly]

as usual asking the wrong questions trying to get some political low blow

 

how about making public which foreign contracts in what countries went to the wall were it seems they were owed a lot of money from completed jobs and were never paid, I'd put money on it that the problems stem from contracts in the EU, all business in the UK it seems was solvent 

[Khun Han]

11 minutes ago, smedly said:

as usual asking the wrong questions trying to get some political low blow

 

how about making public which foreign contracts in what countries went to the wall were it seems they were owed a lot of money from completed jobs and were never paid, I'd put money on it that the problems stem from contracts in the EU, all business in the UK it seems was solvent 

 

The biggest UK loss-making projects are named in this report:

 

http://www.bbc.co.uk/news/business-42703549

 

They also had a big project in Qatar connected to the World Cup, which also lost a lot of money.

[aright]

I'm a great promoter of capitalism but  there is no doubt Carillion is a great example of  failed Capitalism.

I am not a great supporter of Jeremy Corbyn's politics but in this case (as a result of what could be a massive loss of jobs) why doesn't the Government take in (nationalise ) the company,  recapitalise it, reorganise it and later on under a competent CEO and Board of Directors and with a new Mission Statement refloat it. Not in a way dissimilar to the way Lloyds Bank was handled.  

Just a thought.

[Basil B]

1 hour ago, aright said:

I'm a great promoter of capitalism but  there is no doubt Carillion is a great example of  failed Capitalism.

I am not a great supporter of Jeremy Corbyn's politics but in this case (as a result of what could be a massive loss of jobs) why doesn't the Government take in (nationalise ) the company,  recapitalise it, reorganise it and later on under a competent CEO and Board of Directors and with a new Mission Statement refloat it. Not in a way dissimilar to the way Lloyds Bank was handled.  

Just a thought.

While Corbyn and his cronies are trying to political point score on this, one has to remember their part in this mess.

Typical Labour party spokes person (with selective amnesia) on radio4's Today program this morning, after stating what the Tories did wrong, he was questioned about events when Labour was in power, his reply "I don't know about that" like a scratched record...

 

I am no fan of the Tories but the question that everybody keeps asking what have they been doing for the last 3 month, the answer is probably a lot, working out what to do if Carillion went tit's up, if they were seen to be doing something then that would have pushed Carillion over the edge.

 

Why award those contracts to Carillion? possibly Corrillion had approached the government pointing out if they did not get contracts their banks would pull the plug on them.

 

What to do with Corillion. IMHO it should be spit into small companies, each project should be a separate company, then auction them off.

[smedly]

2 hours ago, Basil B said:

While Corbyn and his cronies are trying to political point score on this, one has to remember their part in this mess.

Typical Labour party spokes person (with selective amnesia) on radio4's Today program this morning, after stating what the Tories did wrong, he was questioned about events when Labour was in power, his reply "I don't know about that" like a scratched record...

 

I am no fan of the Tories but the question that everybody keeps asking what have they been doing for the last 3 month, the answer is probably a lot, working out what to do if Carillion went tit's up, if they were seen to be doing something then that would have pushed Carillion over the edge.

 

Why award those contracts to Carillion? possibly Corrillion had approached the government pointing out if they did not get contracts their banks would pull the plug on them.

 

What to do with Corillion. IMHO it should be spit into small companies, each project should be a separate company, then auction them off.

100% agree

 

I would also hold an enquiry with a view to prosecute anyone found to be negligent (I believe this is already happening)

 

The issue is the huge debt and how to deal with that which is why the government is not going to bale them out, I have no doubt that current contracts will be put up for tender by the receivers and certainly some of the workforce will be retained

 

There is no doubt it is one wholly mess but Corbin is doing is a really cheap, it is always easy to criticise from the outside, is some ways I'd love to see him as prime minister just to what an unholy mess he would make of the country - but best that never happens.  

[RuamRudy]

12 hours ago, Basil B said:

While Corbyn and his cronies are trying to political point score on this, one has to remember their part in this mess.

Typical Labour party spokes person (with selective amnesia) on radio4's Today program this morning, after stating what the Tories did wrong, he was questioned about events when Labour was in power, his reply "I don't know about that" like a scratched record...

 

I am no fan of the Tories but the question that everybody keeps asking what have they been doing for the last 3 month, the answer is probably a lot, working out what to do if Carillion went tit's up, if they were seen to be doing something then that would have pushed Carillion over the edge.

 

Why award those contracts to Carillion? possibly Corrillion had approached the government pointing out if they did not get contracts their banks would pull the plug on them.

 

What to do with Corillion. IMHO it should be spit into small companies, each project should be a separate company, then auction them off.

Why were Carillion deliberately bidding low for projects wilst using the pension pot and bank loans to pay bonuses to directors and issue dividends to investors, while all the while preventing honest, bone fide companies from bidding for said projects because Corillion was taking a hit on them?

 

I read the following comment this morning: "A company that was formed out of Tarmac, Mowlem, Alfred McAlpine and part of John Laing...has ended up with "no viable business to sell" - and no significant material assets. A remarkable management achievement."

 

And this was a company run by our PM's choice of Corporate Responsibility Tsar? A man who stuffed his and his fellow directors' pockets with the pension funds of a company he ran into the ground? I will not be happy until I see heads on spikes, but I won't hold my breath - the corruption all the way to No 10 will ensure that full disclosure is nothing but a pipe dream.

[smedly]

26 minutes ago, RuamRudy said:

Why were Carillion deliberately bidding low for projects wilst using the pension pot and bank loans to pay bonuses to directors and issue dividends to investors, while all the while preventing honest, bone fide companies from bidding for said projects because Corillion was taking a hit on them?

 

I read the following comment this morning: "A company that was formed out of Tarmac, Mowlem, Alfred McAlpine and part of John Laing...has ended up with "no viable business to sell" - and no significant material assets. A remarkable management achievement."

 

And this was a company run by our PM's choice of Corporate Responsibility Tsar? A man who stuffed his and his fellow directors' pockets with the pension funds of a company he ran into the ground? I will not be happy until I see heads on spikes, but I won't hold my breath - the corruption all the way to No 10 will ensure that full disclosure is nothing but a pipe dream.

if you knew anything about how these companies work there is nothing new in this, it happens all over the world, big business or small and is how the whole system is rotten to the core. It has nothing to do with the Government and is all legal under the law but governments have the power to change laws so in a way they are part of the problem

 

Over the years there have been many cases were companies go to the wall - they can be private companies or those floated on stock markets but the same scam exists, company directors get away with huge sums of money while paying themselves massive salaries and bonuses and the company goes down the drain, remember it is the company that goes bankrupt not the directors which is something I have always had a problem with and that includes institutions like banks.............remember that one  

 

I remember a classic one in the UK which I have knowledge of were a certain company was in difficulty, they had branches all over the UK and were in difficulty, what they did was put up for sale all the profitable parts/branches and the owners wife bought them up under a new company name and what was left went into receivership (bankrupt) owing millions, a classic example of how it is done 

[billd766]

Interestingly enough Carillion was formed in 1999 when the UK was under the premiership on one, T Blair Esq and the Labour Party.

 

 

[Krataiboy]

15 hours ago, Basil B said:

While Corbyn and his cronies are trying to political point score on this, one has to remember their part in this mess.

Typical Labour party spokes person (with selective amnesia) on radio4's Today program this morning, after stating what the Tories did wrong, he was questioned about events when Labour was in power, his reply "I don't know about that" like a scratched record...

 

I am no fan of the Tories but the question that everybody keeps asking what have they been doing for the last 3 month, the answer is probably a lot, working out what to do if Carillion went tit's up, if they were seen to be doing something then that would have pushed Carillion over the edge.

 

Why award those contracts to Carillion? possibly Corrillion had approached the government pointing out if they did not get contracts their banks would pull the plug on them.

 

What to do with Corillion. IMHO it should be spit into small companies, each project should be a separate company, then auction them off.

Why award those contracts to Carillion? possibly Corrillion had approached the government pointing out if they did not get contracts their banks would pull the plug on them.

 

Ah, the joys of "free market" capitalism, where the taxpayer as backstop to bail out incompetent banks and mismanaged businesses.

[Baerboxer]

4 hours ago, RuamRudy said:

Why were Carillion deliberately bidding low for projects wilst using the pension pot and bank loans to pay bonuses to directors and issue dividends to investors, while all the while preventing honest, bone fide companies from bidding for said projects because Corillion was taking a hit on them?

 

I read the following comment this morning: "A company that was formed out of Tarmac, Mowlem, Alfred McAlpine and part of John Laing...has ended up with "no viable business to sell" - and no significant material assets. A remarkable management achievement."

 

And this was a company run by our PM's choice of Corporate Responsibility Tsar? A man who stuffed his and his fellow directors' pockets with the pension funds of a company he ran into the ground? I will not be happy until I see heads on spikes, but I won't hold my breath - the corruption all the way to No 10 will ensure that full disclosure is nothing but a pipe dream.

 

A nice example of the bad side of capitalism. 

 

But I doubt, as usual, that those involved in awarding themselves bonuses, high salary increases, share options, dividends etc etc whilst mismanaging the company to ruin will be held accountable. 

 

Labor for all its bluster doesn't do much better than the Tories at curbing this and ensuring good corporate governance or responsibility either. And nationalization, handing the running over to union barons and political activists doesn't work as we've seen. 

 

No one supports a balanced approach. Sadly, human greed, egos and false agendas rule the day.

[dunroaming]

17 hours ago, Basil B said:

What to do with Corillion. IMHO it should be spit into small companies, each project should be a separate company, then auction them off.

That is pretty much what the liquidators will do but unlikely by auction.  More likely by tender.

 

4 hours ago, smedly said:

I remember a classic one in the UK which I have knowledge of were a certain company was in difficulty, they had branches all over the UK and were in difficulty, what they did was put up for sale all the profitable parts/branches and the owners wife bought them up under a new company name and what was left went into receivership (bankrupt) owing millions, a classic example of how it is done 

Asset stripping is not illegal but the way the assets are sold off is subject to scrutiny.  What you describe would be illegal.

 

I suspect the real nitty gritty about the collapse of Carillion will be kept under wraps.  They owe over a billion pounds to the banks. The fact that the company has been put into liquidation should indicate that there will be no government bail out.  No matter what happens a lot of people will be out of work.

[aright]

22 minutes ago, dunroaming said:

What to do with Corillion. IMHO it should be spit into small companies, each project should be a separate company, then auction them off.

 

22 minutes ago, dunroaming said:

That is pretty much what the liquidators will do but unlikely by auction.  More likely by tender.

 

I think there will be a difficulty finding buyers when you try to auction off a business which has no tangible assets because everything is sub contracted. Many of them will only have failed contracts to sell or under their belts. There is also the questions of pensions to add to already muddy water.

[dunroaming]

38 minutes ago, aright said:

 

I think there will be a difficulty finding buyers when you try to auction off a business which has no tangible assets because everything is sub contracted. Many of them will only have failed contracts to sell or under their belts. There is also the questions of pensions to add to already muddy water.

I agree.  That's the difference between putting the company into administration and liquidation.  With administration you have the opportunity to separate the parts and turn the loss making around.  Liquidation is just what it says.

[RuamRudy]

9 minutes ago, dunroaming said:

I agree.  That's the difference between putting the company into administration and liquidation.  With administration you have the opportunity to separate the parts and turn the loss making around.  Liquidation is just what it says.

I read something this morning that I did not fully understand, but it suggested that by putting the company into liquidation, it would lessen the opportunity for scrutiny or finger pointing - any ideas on that?

[dunroaming]

4 minutes ago, RuamRudy said:

I read something this morning that I did not fully understand, but it suggested that by putting the company into liquidation, it would lessen the opportunity for scrutiny or finger pointing - any ideas on that?

Well I don't really know but it would seem logical.  Administrators would need to really go through everything to identify what caused the company to fail and try to correct it whereas I imagine the liquidator would be looking to simply assess what parts are saleable.  I could be wrong.  Also if there is an investigation into the people who ran Carillion then that should be very thorough and leave less stones unturned.

[Khun Han]

https://news.sky.com/story/carillion-directors-bonus-payments-stopped-11211292

[Basil B]

6 hours ago, RuamRudy said:

I read something this morning that I did not fully understand, but it suggested that by putting the company into liquidation, it would lessen the opportunity for scrutiny or finger pointing - any ideas on that?

Liquidation = Bankruptcy

Quote

If you file for bankruptcy relief, you must attend a mandatory hearing called the meeting of creditors (also called the 341 hearing). The purpose of this hearing is to allow the bankruptcy trustee and your creditors to examine you under oath about your financial affairs. Read on to learn more about what happens at the meeting of creditors.

http://www.bbc.co.uk/news/uk-politics-42712180

 

[Jonmarleesco]

'Cabinet Office minister David Lidington defended the government's handling of the company.' Or mishandling. Much easier to defend Donald Trump's unscripted pronouncements. 

 

'Senior government officials told a committee of lawmakers that the government allowed the company to bid for contracts because it would have been illegal to stop it and could have accelerated the company's collapse.' Bidding doesn't guarantee they get, or should get, a contract. Does it? As for accelerating the company's collapse ...

 

But then governments have long been handing out these contracts to private firms, regardless of their demonstrated capacity for competence - or not.

[Jonmarleesco]

9 hours ago, Basil B said:

Liquidation = Bankruptcy

http://www.bbc.co.uk/news/uk-politics-42712180

 

Liquidation isn't necessarily a function of bankruptcy. A company's assets can be liquidated without it having been, or needing to be, declared bankrupt.

[RuamRudy]

1 hour ago, Jonmarleesco said:

Liquidation isn't necessarily a function of bankruptcy. A company's assets can be liquidated without it having been, or needing to be, declared bankrupt.

Certainly, the implication in what I read (unfortunately, I cannot find it now) was that there is more than one means of winding up the company - and that the method selected would afford those involved a greater degree of protection from scrutiny.  

[evadgib]

A guide to understanding what the government is doing following Carillion’s collapse.

https://www.gov.uk/government/news/carillion-whats-happening-now

 

https://www.gov.uk/government/news/practical-support-for-businesses-affected-by-carillion-liquidation

[champers]

On 1/16/2018 at 8:54 PM, aright said:

I'm a great promoter of capitalism but  there is no doubt Carillion is a great example of  failed Capitalism.

I am not a great supporter of Jeremy Corbyn's politics but in this case (as a result of what could be a massive loss of jobs) why doesn't the Government take in (nationalise ) the company,  recapitalise it, reorganise it and later on under a competent CEO and Board of Directors and with a new Mission Statement refloat it. Not in a way dissimilar to the way Lloyds Bank was handled.  

Just a thought.

A bad thought. A nationalised company bidding for government contracts against private companies? Mmm. No chance of favouritism to the bailed out company?

There are plenty of other companies around to take up the slack left by Carrillion's departure. Ironically, one is Balfour Beatty. They are the UK's largest construction company. They recently went to the brink after repeated profit warnings and cashflow problems, but ultimately turned things around by major changes at the top of their management. Whilst at their lowest point they were subject to a series of takeover bids from Carrillion.

Carrillion have not learned from the mistakes of others. They have moved away from their core business and prioritised building the value of their order book rather than making profits.

I feel for the thousands of employees and suppliers who have been royally shafted by a board of directors who have taken good care to ensure their own personal bonuses and pensions are gold plated. There will be no personal responsibility taken by the board. The worst that will happen is an enquiry advising they were reckless, incompetent and greedy: a statement of the bleeding obvious.

Their auditors need to be held to account as well for choosing to hang on to a large client, rather than rock the boat by disclosing the true horror evident in front of their eyes.

The whole tawdry mess is an example of the City old boys network in full swing. Prison should be the final destination for these shucksters and shysters, but, as in the case of the bank collapses of a decade ago, that outcome is the least likely.

 

[vogie]

[thaibeachlovers]

23 hours ago, billd766 said:

Interestingly enough Carillion was formed in 1999 when the UK was under the premiership on one, T Blair Esq and the Labour Party.

 

 

Why does that not surprise me? I remember how that mob under Brown managed to waste 6 BILLION quid in the NHS, which is still a catastrophic failure in the process of collapsing under the weight of management incompetence.

If anyone was ever in doubt that Britain at the highest levels is corrupt, this should leave them in no doubt.

For the amount they wasted on that bunch of corrupt incompetents, they could have built an all British warplane for their new carriers.

[RuamRudy]

13 minutes ago, thaibeachlovers said:

Why does that not surprise me? I remember how that mob under Brown managed to waste 6 BILLION quid in the NHS, which is still a catastrophic failure in the process of collapsing under the weight of management incompetence.

If anyone was ever in doubt that Britain at the highest levels is corrupt, this should leave them in no doubt.

For the amount they wasted on that bunch of corrupt incompetents, they could have built an all British warplane for their new carriers.

I have never voted Labour in my life so I have no particular desire to defend them, but we have not had a labour government since 2010 - surely time for the tories to start accepting responsibility for a failure that was well and truly on their watch, and caused by people who are well and truly dyed in the wool Conservative.

[RuamRudy]

58 minutes ago, vogie said:

A carillion is the amount of money that the Panama based gravy train can carry.

[Basil B]

I think the real problem is the PFI gravy train...

 

Introduced by the Major government of 1992 and widely condemned by the labour opposition, The use of PFI was very limited until 1997 but became widespread under the new Labour government.

 

With hospitals, schools and other government builds built on the "Nether Never" (PFI) it has come back to bit the government on the backside, and the writing has been on the wall for years, with local authorities and NHS trusts saying they can not afford these buildings and talking about handing them back...

[smedly]

36 minutes ago, RuamRudy said:

I have never voted Labour in my life so I have no particular desire to defend them, but we have not had a labour government since 2010 - surely time for the tories to start accepting responsibility for a failure that was well and truly on their watch, and caused by people who are well and truly dyed in the wool Conservative.

this was a private company, I believe the government attempted to give them business but they still managed to (deleted) it up.

 

The problem I have with all of this is the lack of accountability, as already mentioned above - first it was the banks, the corporate world is corrupt right across the globe and there is absolutely nothing can be done about it because they own the governments which are all bought a paid for, the whole system is rotten 

 

There is only one way to deal with it unfortunately...................................the big reset button - which is WW3

[thaibeachlovers]

1 hour ago, RuamRudy said:

I have never voted Labour in my life so I have no particular desire to defend them, but we have not had a labour government since 2010 - surely time for the tories to start accepting responsibility for a failure that was well and truly on their watch, and caused by people who are well and truly dyed in the wool Conservative.

I left the UK before Cameron took over, so have no experience of a Tory government, but I expect they are just as, IMO, incompetent, venal, corrupt and crooked as New labour, IMO, was.

The Brexit fiasco under that, IMO, incompetent May has done nothing to change my mind on that. I don't think Labour under Corbyn would be any better.