Skip to main content

Carillion was a major player in Britain’s health-care, military and transportation sectors.

DANIEL SORABJI/Getty Images

The British government is scrambling to cope with the collapse of global construction giant Carillion PLC, which has thrown the future of 43,000 jobs worldwide into question, including thousands in Canada.

Carillion filed for liquidation on Monday after piling up debt of more than £1.5-billion (or $2.57-billion), including a £587-million pension deficit. The company was a major player in Britain's health-care, military and transportation sectors. It was involved in 450 government projects, including construction of the country's new £1.4-billion high-speed rail line, as well as managing 50,000 homes for the military and providing services to 50 prisons, 230 schools and hospitals with a total of 11,800 beds.

In Canada, Carillion employed roughly 6,000 people involved in the energy, health-care and transportation sectors. Its Canadian operations included maintaining housing at Canadian Forces Base Petawawa, building roads in Ontario and Alberta and constructing hospitals in Toronto; North Battleford, Sask.; Sault Ste. Marie; Oakville, Ont.; Brampton, Ont.; Ottawa and Nunavut. It's not clear what impact the liquidation filing in Britain will have on the Canadian division.

Story continues below advertisement

"This is a very sad day for Carillion, for our colleagues, suppliers and customers that we have been proud to serve over many years," company chairman Philip Green said in a statement on Monday. "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."

The liquidation comes at a difficult time for British Prime Minister Theresa May, who is already grappling with Brexit and ongoing negotiations with the European Union. She also heads a minority government which has left her in a weak leadership position. The cabinet's emergency committee, known as Cobra, met late Monday to assess the liquidation, and earlier in the day deputy Prime Minister David Lidington told members of Parliament that there would be no bailout of Carillion.

"The company's shareholders and lenders will bear the brunt," Mr. Lidington told the House of Commons. "Taxpayers should not and will not bail out a private-sector company for private-sector losses."

Mr. Lidington also said the court-appointed official receiver will review the actions of Carillion management to determine if any sanctions were necessary.Nonetheless, the government faces difficult decisions, with potentially thousands of workers out of a job and hundreds of schools and hospitals without critical services. The government has promised to take over Carillion's public contracts and it will cover some of the liquidation costs. But that has done little to quell criticism about these kinds of public-private partnerships.

Opposition members of Parliament were quick to demand a public inquiry into the company's collapse and they blamed the government for continuing to give Carillion contracts this year even after the company issued three profit warnings. Labour MP Jon Trickett called the government's conduct "recklessly complacent." "Why was it apparent to everyone except the government that Carillion was in trouble?" he asked

Mr. Lidington in the House of Commons.

Labour Leader Jeremy Corbyn said private companies such as Carillion should not have received the public-sector work in the first place and that it was time to "end the rip-off privatization policies that have done serious damage to our public services and fleeced the public of billions of pounds."

Story continues below advertisement

Mr. Lidington insisted that the government was aware of the company's troubles and had prepared contingency measures in case the contracted work could not be fulfilled by Carillion.

Carillion had spent months restructuring and scaling back unprofitable projects, particularly in Britain and the Middle East. The company had also been trying to sell its Canadian health-care operations as part of an effort to raise £300-million, something chief executive Keith Cochrane said was critical to the success of the restructuring. Last July, Carillion attributed most of its problems to four projects in Britain and the Middle East as well as the cost of pulling out of Canada. That resulted in an £845-million writedown which set the stage for the eventual liquidation. Among the troubled projects were two hospitals in England and a highway in Scotland. Carillion also had problems with projects in Egypt, Qatar and Saudi Arabia and pulled out of those countries in the fall. "Carillion took on too many unprofitable contracts," Mr. Cochrane said on a conference call with analysts in September. "In too many cases we were building a Rolls-Royce, but only getting paid to build a Mini."

Last week some of the company's largest bankers balked at providing any extra lending without some intervention from the government. A series of frantic meetings over the weekend failed to find a solution and the company announced the liquidation on Monday morning.

Report an error Editorial code of conduct
Comments are closed

We have closed comments on this story for legal reasons or for abuse. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.
Cannabis pro newsletter