Economy

Government urged to act amid fears of Carillion collapse

Government urged to act amid fears of Carillion collapse

Carillion: Has debts of £1.15 billion.

Tory party chairman Brandon Lewis told BBC1's The Andrew Marr Show: "It is a going concern, it's a very commercially sensitive situation so I wouldn't comment further than to say it is a going concern".

Carillion - which issued three profit warnings in less than six months previous year and has seen its market value collapse by more than 90% - is a major supplier to the government with contracts across education, the NHS and the rail industry, including HS2.

Carillion, which has been handed part of the contract to build HS2 and also oversees hospitals, schools and prisons, is on the brink of administration, requiring a £300 million cash boost to keep operating.

Despite the red flags the government has continued to award the company major public contracts, including on the flagship HS2 project, leading to criticism Sunday.

Liberal Democrat leader Sir Vince Cable who has said that shareholders and creditors, not taxpayers, should take the financial "hit" of saving struggling construction giant Carillion from collapse.

Government officials have said they are keeping a close eye on the business and have contingency plans in place.

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Carillion is a key supplier to the Government and has contracts in the rail industry, education and NHS. "The company has kept us informed of the steps it is taking to restructure the business".

In a statement released after the London market close on Friday, Carillion confirmed that it met with representatives of its creditor groups to present its business plan on 10 January 2018 but had refuted the suggestions that its plans had been rejected.

Shares in Carillion plunged nearly 30 per cent to a new low on Friday after Sky News reported it had put administrators on standby, while an official told Reuters that creditors did not like the plan put forward.

Sky News revealed on Friday that EY, the accountancy firm, had been placed on standby to act as administrator to Carillion although it remained possible that PricewaterhouseCoopers could be appointed.

It also has a pension black hole of £587million that puts the retirements of 28,500 at risk.

The Rail, Maritime and Transport (RMT), Unite and GMB unions all called for workers rights, including pensions, to be protected as a priority.

However, it is also the second largest supplier of maintenance services to Network Rail and maintains 50,000 homes for the Ministry of Defence, manages almost 900 schools and manages roads and prisons. It is also under investigation from the UK Financial Conduct Authority over "the timeliness and content of announcements" made between December 2016 and July a year ago.