Construction giant Carillion has said it has “no choice but to take steps to enter into compulsory liquidation with immediate effect” after talks failed to find another way to deal with the company’s debts.
The stricken company, which employs 20,000 workers across Britain, said crunch talks over the weekend aimed at driving down debt and shoring up its balance sheet had failed to result in the “short term financial support” it needed to continue trading while a deal was reached.
Carillion, which has been struggling under £900 million of debt and a £590 million pension deficit, has seen its shares price plunge more than 70% in the past six months after making a string of profit warnings and breaching its financial covenants.
READ MORE: Share price ‘horror’ for Carillion
Chairman Philip Green said: “This is a very sad day for Carillion, for our colleagues, suppliers and customers that we have been proud to serve over many years.
“Over recent months huge efforts have been made to restructure Carillion to deliver its sustainable future and the board is very grateful for the huge efforts made by Keith Cochrane, our executive team and many others who have worked tirelessly over this period.
“In recent days however we have been unable to secure the funding to support our business plan and it is therefore with the deepest regret that we have arrived at this decision.
“We understand that HM Government will be providing the necessary funding required by the Official Receiver to maintain the public services carried on by Carillion staff, subcontractors and suppliers.”
The company is understood to have public sector or public/private partnership contracts worth £1.7 billion, including providing school dinners, cleaning and catering at NHS hospitals, construction work on rail projects such as HS2 and maintaining 50,000 army base homes for the Ministry of Defence.
As a result, the Government has been under increasing pressure to intervene to prevent the collapse of the company.
Unions are calling for urgent reassurances over the jobs, pay and pensions of thousands of workers following the “disastrous” news.
Officials from several unions representing workers on the railways, construction sites, prisons, hospitals and schools are seeking information from the company and ministers.
Rail, Maritime and Transport union General Secretary Mick Cash said: “This is disastrous news for the workforce and disastrous news for transport and public services in Britain.
“We have been warning since Thursday night that we thought the collapse of the company was imminent.
“The blame for this lies squarely with the Government who are obsessed with out-sourcing key works to these high risk, private enterprises.
“RMT will be demanding urgent meetings with Network Rail and the train companies today with the objective of protecting our members jobs and pensions.
“The infrastructure and support works must be immediately taken in house with the workforce protected.
“Transport Secretary Chris Grayling and his Tory colleagues must be forced to take responsibility for this crisis which is wholly of their making.”
Carillion had met with lenders HSBC, Barclays, Santander and Royal Bank of Scotland on Wednesday to discuss options for reducing debts, recapitalise or restructure the group’s balance sheet.
It was followed by a meeting on Friday between the Government, pension authorities and stakeholders in an attempt to thrash out a rescue package for the firm.
A petition launched over the weekend calling for Carillion to be nationalised had attracted more than 1,200 signatures.
Commenting on the news Jamie Greene, the Scottish Government minister for infrastructure said: “It is disappointing to hear that efforts to restructure the company have failed.
“Carillon operates across the whole of the UK, employs thousands of staff and has responsibility for a number of vital projects in Scotland.
“Ensuring the continuation of ongoing projects and that Carillon staff impacted by this decision are afforded a fair settlement must be the immediate priority.
“The Scottish Government and Transport Scotland must outline what contingency plans are in place following the announcement that liquidators have been called in.”