The UK construction giant Carillion enters into compulsory liquidation after the refusal of its lenders to provide further fiscal support. A vast number of jobs and major government contracts are in danger.
Carillion was one of the most important suppliers for the UK government, and it is the second biggest UK construction player in terms of turnover with more than 43,000 employees around the world and approximately 20,000 in Great Britain.
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Nevertheless, the British government has already promised to fund and preserve the public services provided by Carillion suppliers, subcontractors and staff.
Too many risky contracts in combination with a significant drop in new business appear to be the main reasons that led to this shocking outcome.
Philip Green, Carillion Chairman, mentioned: “This is a very sad day for Carillion, for our colleagues, suppliers and customers that we have been proud to serve over many years’’.
And he continued by adding:
“In recent days 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 Chairman revealed also that during the last months, there had been a tireless effort for Carillion’s restructure in order to build a viable future for the company with the help of Keith Cochrane and the rest of the executive team.
However, the debt and liabilities of £1.5 billion made it impossible for Carillion to recover. Santander UK, RBS and HSBC are among others some of the most notable creditors of Carillion.
The talks regarding the future of the company were continuous during the weekend. They reached to a dead-end when lenders made it clear that they wouldn’t be open to provide further help without the support of the UK government.
On top of that and based on the latest news, Greg Clark, business secretary, intervened today (16/01) in order for Carillion senior staff (present and former) to be investigated.
HS2 project still safe!
Carillion was part of the CEK joint venture and they were working alongside Eiffage and Kier on the major HS2 project (High Speed 2), the new rail line that is expected to connect the Northern part of England with London.
According to Construction News, Haydn Mursell, Kier CEO, mentioned that there are numerous options available for the venture partners despite Carillion’s collapse. One of these options could be the reassignment of Carillion’s staff to Eiffage and Kier or to another contractor that would be interested in joining the venture for that purpose.
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The HS2 project was assigned to Carillion, Eiffage and Kier by the government last July. CEK JV had become the preferred bidder after providing two phase one civils packages that were amounted to approximately £1.4 billion. What is extremely interesting in this case is that the award of the project took place just a few days after the announcement of a striking profit warning by Carillion.
Some of Carillion’s major projects
HS2 was only one of the large-scale projects that Carillion has worked on. Through the years, the UK construction giant had been responsible for some remarkable projects that changed not only Britain but other parts of the world, as well.
Some of its most representative building projects can be found below:
London’s Royal Opera House
The doughnut-shaped GCHQ (Government Communications Headquarters in UK) headquarters
Road tunnel under Suez Canal
Union Station at Toronto
The Library of Birmingham
The Tate Modern Project
A strong wake-up call for the construction industry
Without any doubt, Carillion’s collapse was a strong wake-up call for both the UK and the global building sector. Now more than ever, it is evident that the construction industry has to change. Risk should be minimized and a more transparent and accountable construction process has to be introduced.
But first, there are some steps that need to be taken before we could claim that the industry is ready. In a nutshell, here are two of the most crucial points:
Systematic data management
First things first, data is the oxygen for the building industry. That’s why a solid data management procedure is fundamental for the development of every construction project. Data can help construction in a plethora of ways. Among others, it could allow for more accountability and transparency. By keeping track of every project-related piece of information would be possible for contractors and clients to stay aware of the challenges and hiccups that they may approach their way. On top of that, scientific data management could help with the prediction of upcoming trends and the prevention of risky mistakes.
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Digitisation under the spotlight
From this corner, we have referred many times to the importance of digital tools for construction. Building projects are becoming more and more complicated and having a well-functioning plan in place can be a life-saver. The use of digital solutions could help the industry overcome some of its fundamental struggles, such as low productivity, low predictability, lack of collaboration and leadership fragmentation. All these issues are listed on the 2016 Mark Farmer report entitled “Modernise or Die” and they were some of the main reasons why the UK government introduced the BIM mandate a while ago.
It’s clear that the UK construction is under a lot of pressure at the moment and the next few days are expected with great interest. The talks between the UK government, Carillion and the lenders will continue this week and everybody is waiting for the final outcome with great interest.