The crisis at Carillion deepened on Friday after reports that lenders had effectively rejected a rescue plan and that two of the Big Four accountancy firms were preparing to act as administrators. Both EY and PwC are believed to be vying to take on the role should Carillion collapse.
The company is thought to require at least £210m in short-term funding to continue operating and implement a turnaround plan. But lenders effectively rejected a rescue proposal tabled by Carillion on Friday because it failed to present a “solid proposition” for restructuring the business, the Press Association reported.
Carillion revealed half-year losses of £1.15bn in September and is struggling under £900m of debt and a £590m pension deficit. The company is in crunch talks over its future with ministers and the Pensions Regulator.
Carillion’s worsening health could put some of its 19,500 UK employees’ jobs at risk. It has also raised fears that taxpayers could be left with the cost of running some of the company’s government contracts.
The company is a major supplier to the Government, maintaining prisons across the country and managing around 900 schools. It is also a key contractor on the £56bn HS2 rail project.
Shadow business secretary Rebecca Long-Bailey said the collapse of Carillion could “provoke a serious crisis”.
“It would have major implications for the outsourced government contracts the company holds, as well as the firm’s thousands of workers, those in the supply chain and those who rely on Carillion’s pension fund.
“The Government, who despite warnings carried on with its programme of outsourcing public services to this company, must stand ready to bring these contracts back into public control, stabilise the situation and safeguard our public services.”
A spokesperson for the Pensions Regulator said the organisation remained “closely involved” in discussions with Carillion and the trustees of its pension schemes.
Rehana Azam, national officer of the GMB union, said jobs must be protected.
“Handing Carillion bosses a blank cheque bail-out is completely unacceptable,” Ms Azam said, adding that the company had an “abysmal” track record on protecting workers.
Carillion, which has had to contend with a slowdown in many of its major markets, has seen its share price plummet from 230p a year ago to less than 15p on Friday.
The firm is currently under investigation by the Financial Conduct Authority over the “timeliness and content of announcements” made between December 2016 and July 2017.