Carillion collapse likely to cost taxpayers estimated £148m

The National Audit Office (NAO) has reported that the recent collapse of large construction firm Carillion will cost UK taxpayers an estimated £148 million.

Investigating the government’s handling of the collapse, the NAO says that its liquidation will cost UK taxpayers an estimated £148 million, although this could take years to establish the final cost, with wider costs to the economy, Carillion’s customers, staff, the supply chain and creditors also likely.

Shortly after the company posted its first profit warning on 10 July 2017, the government began contingency planning for its possible failure, which was finalised by 15 January 2018, when Carillon collapsed. When it was liquidated with debts of £1.5 billion in January, the firm had about 420 UK public sector contracts. However, since then, 11,638 Carillion workers in the UK, representing 64 per cent of its total workforce, have found new jobs. Of the rest, 2,332, 13 per cent of the total, had been made redundant and the remaining 3,000 were still employed by Carillion.

Although most services provided by Carillion continued uninterrupted after the firm's collapse, the NAO has revealed that work on some construction projects stopped, including building work on two hospitals funded by Private Finance Initiatives, with Carillion's non-government creditors unlikely to recover much of their investments. Furthermore, the company’s extensive pension liabilities, totalling £2.6 billion as of 30 June 2017, will need to be compensated through the Pension Protection Fund.

Amyas Morse, head of the NAO, said: “When a company becomes a strategic supplier, dependencies are created beyond the scope of specific contracts. Doing a thorough job of protecting the public interest means that government needs to understand the financial health and sustainability of its major suppliers, and avoid creating relationships with those which are already weakened. The government has further to go in developing in this direction.”