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Why UK construction giant Carillion declared bankruptcy
The future of contracts both locally and overseas are thrown into question
A crisis in the U.K.’s construction industry came to a head this week: construction giant Carillion declared bankruptcy this week in a move that reports say has shaken the U.K’s public confidence in private corporations and throws contracts all over the world into question.
The second-largest contractor in the U.K. throws into question its 450 contracts with the U.K. government that includes two state-of-the-art hospitals, a regeneration scheme in Durham, and several billion-dollar infrastructure contracts for the HS2 high-speed rail link and the Aberdeen bypass in Scotland — all in addition to contracts overseas in Canada and in Qatar, according to the New York Times.
The BBC reports Carillion was also responsible for initiatives such as a lunch-delivery program for about 200 students and maintaining living facilities for about 50,000 members of the military. The company employed 20,000 people in the country and another 23,000 overseas.
Though financial woes were not new, the contractor was working on negotiating new terms of its loans, which amounted to about a $1.8 billion debt by the end, but told the BBC that banks declared their proposed restructuring not viable and demanded lending conditions the company could not meet.
In documents, chief executive Keith Cochrane pointed fingers in particular at Royal Bank of Scotland for what he called “unilateral action which in the company’s view undermined the group’s efforts to conserve cash.”
Business Secretary Greg Clark request a government investigation into the conduct of current and former directors be launched, as well as the company’s auditors, KPMG.
“It is important we quickly get the full picture of the events which caused Carillion to enter liquidation,” Clark told the BBC. “Any evidence of misconduct will be taken very seriously.”
Meanwhile, 30,000 architects, small contractors and other small businesses worked for the construction giant and are either owed money or now are facing the loss of one of their primary clients.
[BBC] — Erin Hudson