Carillion news: Taxpayer picks up bill as Government scrambles to stop construction giant's collapse causing chaos in schools and hospitals

Ministers scrambled today to stop the collapse of Carillion from causing chaos in schools, hospitals and other public services — with taxpayers picking up the bill for the emergency intervention.

The construction and services giant went bust early this morning, having racked up debts and liabilities of about £1.5 billion.

Cabinet Office minister David Lidington said it was a “crisis” situation and the Government immediately stepped in to pay the wages of staff delivering public services. The demise of the business left tens of thousands of employees, including many at supply chain firms which have contracts with Carillion, fearing for their jobs. There were also concerns about pension payments.

On reports that Carillion continues to pay its former chief executive Richard Howson, who quit last year, his £660,000 salary, the Prime Minister’s official spokesman said: “We wouldn’t expect to be seeing people benefiting from this failure."

The company is not a household name but is Britain’s second largest construction firm. It is understood to have public sector or public/private partnership contracts worth £1.7 billion.

Follow the latest updates on Carillion live here.

These include providing school dinners and cleaning services to almost 900 schools; delivering maintenance and facility management services to hospitals, including 200 operating theatres, covering almost 12,000 beds and catering for 19,000 meals a day; construction work on rail projects including HS2 and Crossrail; maintaining 50,000 Army base homes; £200 million of prison contracts; and other major construction projects.

Given the scale of Carillion’s work, Mr Lidington took to the airwaves early this morning to insist its collapse would be handled in a “managed, orderly fashion” with some services being taken in-house and others going out to alternative contractors. He told BBC radio: “The first priority is ensuring that public services continue. So the message to workers is, ‘Come in to work today and you will be paid. The Government will pay your wages via the Official Receiver, not via Carillion.’”

He said the taxpayer will have to pick up a bill for the intervention but that this was better than a chaotic meltdown with a “firesale” of Carillion’s assets.

There are concerns that the bill to the taxpayer could grow. Ministers faced questions over whether they continued to award Carillion contracts, despite profit warnings, in a bid to prop it up.

Problems for some Carillion workers were already clear this morning. The RMT union said train cleaners had been told to work only to find their fuel cards were not working at petrol stations.

The firm employs 20,000 workers across Britain and another 23,000 overseas. It said crunch talks over the weekend failed to result in the “short-term financial support” it needed to continue trading while a deal was reached.

It has been struggling under £900 million of debt and a £590 million pension deficit. It has seen its shares price plunge more than 70 per cent in the past six months after making a string of profit warnings and breaching its financial covenants.

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. 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.”

Carillion had met lenders HSBC, Barclays, Santander and RBS on Wednesday to discuss options. Mr Lidington said that recent contracts awarded to Carillion had been done in such a manner that partners involved in the consortiums would have to pick up responsibility for delivering them if the firm went under. He said the Government has been “drawing up contingency plans” since last year. Ministers are to face questions by the Commons Public Administration Committee, however.

The Official Receiver has been appointed with partners at accountancy giant PwC to oversee the liquidation.

Shadow business secretary Rebecca Long-Bailey said there were “extreme concerns” about the handling of the situation and that Whitehall should take Carillion contracts back in-house. She called for a “full and transparent investigation”. The business is facing an investigation by the Financial Conduct Authority over what it told the Stock Exchange about its position.

Chief executive Mr Howson stepped down in the summer as the group said it needed to bolster its balance sheet and was struggling to stay within its borrowing limits.

He is reported to have received pay and perks totalling £1.5 million in 2016, to have had an annual salary of £660,000 and to have carried on being paid for 12 months after his departure.