Carillion collapse to cost taxpayer £148m, NAO says

 

The liquidation of Carillion will cost UK taxpayers an estimated £148m, the National Audit Office (NAO) has said, excluding around £2.6bn pension liabilities and losses by the firm’s non-government creditors.

The NAO has published its investigation into the Government’s handling of the collapse of the infrastructure and outsourcing giant.

The Government has largely escaped criticism in the report, although the NAO said it needs to ‘do better’ at understanding the financial health of its top suppliers and avoid creating relationships with those that are already weakened.

”Local
Carillion was a major supplier to Network Rail

The Cabinet Office's estimated £148m bill for the insolvency is subject to a range of uncertainties and it could take years to establish the final cost, auditors said. This would be covered by the £150m the Cabinet Office has already provided.

The NAO added that Carillion’s non-government creditors ‘are unlikely to recover much of their investments’, and the company’s extensive pension liabilities, totalling £2.6bn as of June 2017, will need to be compensated through the Pension Protection Fund.

Amyas Morse, the head of the NAO, said: ‘When a company becomes a strategic supplier, dependencies are created beyond the scope of specific contracts.

‘Doing a thorough job of protecting the public interest means that government needs to understand the financial health and sustainability of its major suppliers, and avoid creating relationships with those which are already weakened. Government has further to go in developing in this direction.’

John Trickett MP, Labour’s shadow Cabinet Office minister said the Conservatives had been wrong to say the cost of Carillion’s collapse would be borne by shareholders. He wrote on Twitter: ‘Yet again the public pay the price for a Government blinded by an obsession with privatisation.’

The investigation has identified that the Cabinet Office began planning for the possible failure of Carillion shortly after the company posted its first profit warning in July 2017. It states: ‘The scale of the profit warning came as a surprise to the Government, as it contradicted market expectations and information and commentary that had been provided by Carillion.’

The Cabinet Office raised Carillion’s risk rating from amber to red in response to the profit warning ‘but did not increase Carillion’s rating to its highest rating, “high risk” as it accepted Carillion’s argument that it was already in receipt of the sensitive financial information such a rating would require and that did not wish to risk precipitating Carillion’s financial collapse’.

The company subsequently announced £1.9bn of new government work, including £1.3bn of HS2 contracts. Many contracts had been agreed before the profit warning, although in some cases contracts were signed, or variations agreed, afterwards.

According to the NAO, none of the contracting authorities believed they had grounds for disqualifying Carillion’s contracts under procurement rules. Carillion’s partners in joint ventures were also liable to take over and finish the contracts if Carillion failed.

In the case of Network Rail, ‘not awarding contracts would have meant re-procuring and redesigning the projects, increasing costs for the taxpayer and delaying work'. At the point of liquidation, Carillion had around 420 contracts with the UK public sector.

The Cabinet Office suggests all services have continued uninterrupted following liquidation, although work on some construction contracts stopped including two PFI hospitals, the NAO said.

Also see

Register now for full access


Register just once to get unrestricted, real-time coverage of the issues and challenges facing UK transport and highways engineers.

Full website content includes the latest news, exclusive commentary from leading industry figures and detailed topical analysis of the highways, transportation, environment and place-shaping sectors. Use the link below to register your details for full, free access.

Already a registered? Login

 
comments powered by Disqus
 
 
highways jobs

Head of Economic Development & Regeneration

North Worcestershire
£65k (more may be available depending on skills & experience)
Our vision for North Worcestershire is that it will be a destination of choice for employers Worcestershire
Recuriter: North Worcestershire

TRANSPORT FOR WALES APPOINTMENT OF NON-EXECUTIVE CHAIR

Transport for Wales
£425.00 per day
Transport for Wales (TfW) is a not for profit company, wholly-owned by the Welsh Government and established in 2015. Wales
Recuriter: Transport for Wales

Fire Safety Contract Manager

Camden London Borough Council
£40,028 to £46,431
We are currently seeking an experienced Fire Safety Contract Manager to lead and co-ordinate activities and to ensure that the service is managed Camden, London (Greater)
Recuriter: Camden London Borough Council

Pest Control Officer

Camden London Borough Council
£27,093 to £29,188
As a Pest Control Officer within Environmental Health, Business and Consumer Services your focus will be to deliver pest control treatments Camden, London (Greater)
Recuriter: Camden London Borough Council

Operations Manager – Waste and Recycling

Bath & North East Somerset Council
£38,052- £40,858.
This is an exciting opportunity for an experienced waste management professional Bath, Somerset
Recuriter: Bath & North East Somerset Council

HGV Driver/Loader

Torridge District Council
£18,070 - £20,138
DRIVER/LOADER (HGV) Driving and loading a refuse/recycling collection vehicle up to 26 tonne gross weight, you will collect recycling or household ... Bideford, Devon
Recuriter: Torridge District Council

Principal Transport Officer

Cambridgeshire County Council
£37,320 to £40,198
The role will require close dialogue with developers and their agents and necessitate strong partnership working with District Councils... Cambridge, Cambridgeshire
Recuriter: Cambridgeshire County Council

Senior Engineer – Traffic and Road Safety

Redbridge London Borough Council
£35,992 - £38,994 per annum
Redbridge Council is an outer Borough, working to improve the environment and its services for residents and businesses. Redbridge, London (Greater)
Recuriter: Redbridge London Borough Council

Trainee Technician – Active and Sustainable Travel

Redbridge London Borough Council
£20,667 - £22,424 per annum
Redbridge Council is an outer Borough, working to improve the environment and its services for residents and businesses. Redbridge, London (Greater)
Recuriter: Redbridge London Borough Council

Senior Engineer – Parking

Redbridge London Borough Council
£35,992 - £38,994 per annum
To be responsible for the delivery of parking engineering design and implementation of schemes across the borough Ilford, London (Greater)
Recuriter: Redbridge London Borough Council

Senior Engineer – Highway Maintenance/Asset Management

Redbridge London Borough Council
£35,992 - £38,994 per annum
To be responsible for highway asset management, reactive and planned highway maintenance, highway safety and structural surveys and inspections. Ilford, London (Greater)
Recuriter: Redbridge London Borough Council

Trainee Technician – Projects

Redbridge London Borough Council
£20,667 - £22,424 per annum
Redbridge Council is an outer Borough, working to improve the environment and its services for residents and businesses. Redbridge, London (Greater)
Recuriter: Redbridge London Borough Council

Senior Engineer – Flood Management/Civil Engineering

Redbridge London Borough Council
£35,992 - £38,994 per annum
To provide expert advice on highway and land drainage, flood risk management, sustainable drainage, highway structures and bridges... Ilford, London (Greater)
Recuriter: Redbridge London Borough Council

Senior Engineer – Development Control

Redbridge London Borough Council
£35,992 - £38,994 per annum
To be responsible for assisting and supporting the operational delivery of the Council’s highways development control function and to assist the lead Ilford, London (Greater)
Recuriter: Redbridge London Borough Council

Engineer – Projects

Redbridge London Borough Council
£30,930 - £32,638 per annum
To assist with the delivery of highway and land drainage, flood risk management, sustainable drainage, highway structures and bridges... Ilford, London (Greater)
Recuriter: Redbridge London Borough Council

Engineer – Parking

Redbridge London Borough Council
£30,930 - £32,638 per annum
To assist with the delivery of parking engineering design and implementation of schemes across the borough Ilford, London (Greater)
Recuriter: Redbridge London Borough Council

Engineer (Bridges)

Cambridgeshire County Council
£32,825 - £35,401
You will have experience in the development, planning, design and implementation of transport infrastructure and related projects Cambridgeshire
Recuriter: Cambridgeshire County Council

Pest Control Officer

Brent Council
£25,746 - £27,342 p.a. inc.
Salary range
Recuriter: Brent Council

Streetworks Officer

Westminster City Council
£32,592 - £41,601
As Streetworks Officer you will be a member of the permitting and streetworks team City of Westminster, London (Greater)
Recuriter: Westminster City Council

Vehicle Mechanic

Rugby Borough Council
£23,866 - £28,221 (£28,703 - £33,941 pro rata for 44.5 hours per week)
The post holder will ideally be qualified to undertake taxi compliance testing, preparation for MOT testing from Class 4 and 7. Rugby, Warwickshire
Recuriter: Rugby Borough Council