'Worries' over giant contractor Interserve in wake of Carillion collapse

Carillion collapsed on Monday and no doubts have been raised about Interserve (Joe Giddens/PA Wire)

A team of government officials is keeping a watching brief on giant contractor Interserve as the fallout over the collapse of Carillion deepens.

Shares in the company – which employs about 25,000 people in the UK and 80,000 worldwide – fell 15% in early trading on news there appears to be real concern about its financial health.

A government official told the Financial Times ministers were “very worried” about Interserve – which, like Carillion, has a raft of public sector contracts to provide cleaning, security, probation, healthcare and construction services.

MORE: Carillion collapse: what it means for railways, schools and pensions

Interserve’s chief executive quit ahead of a profit warning last September which saw shares lose over half their value.

It blamed high costs from its exit from the waste-to-energy project in Glasgow and tough trading in its construction and business services arms.

Carillion had just £29m left in the bank at the weekend, it has emerged (REUTERS/Simon Dawson)

The group announced in December it had secured £180m of short-term funding to see it through until the end of March and to put its finances on a “firmer footing”.

Interserve has an order book worth £7.4bn, with numerous public sector contracts including healthcare for the elderly at home, and cleaning services for hospitals and law courts.

MORE: Carillion collapse: will pensions still be paid?

A Cabinet Office statement issued on Wednesday sought to downplay concerns about the company.

“We monitor the financial health of all of our strategic suppliers, including Interserve,” it said.

“We are in regular discussions with all these companies regarding their financial position. We do not believe that any of our strategic suppliers are in a comparable position to Carillion.”

Neil Wilson, ETX Capital’s senior market analyst, said that while Interserve has had its problems, it would be wrong to put it in the same bracket as Carillion.

“Its latest update showed improvement and the news will do no good for sentiment given there may be some twitchiness among investors in the sector following Carillion’s collapse,” he added.

Carillion went into liquidation on Monday, unable to service its £1.5bn debt mountain, which includes a near £600m pension fund.

Hundreds of smaller companies that rely on Carillion sub-contracts have already said they are laying off workers.

It has emerged today that Carillion had just £29m left in the bank over the weekend.

The company was part of the HS2 high speed rail project, cleaned prison, ran school dinner services, cleaned hospitals and built major road schemes – billions of pounds in taxpayer contracts.

However, Keith Cochrane, its chief executive, has revealed it was in talks with the government as early as October to avoid a collapse.

MORE: RBS pulled plug on Carillion days before collapse

Directors still believed a rescue was possible, but banks became more demanding, he said.

Documents prepared for the insolvency process show the company wanted the government to “guarantee” more funding for four months while Carillion continued its restructuring.

It also wanted to defer tax payments but both requests were refused, according to Cochrane.

On Monday, the Official Receiver was appointed to liquidate the business.