Talks are continuing to try to save the troubled construction firm Carillion amid reports it could collapse by Monday.The future of the firm is being discussed at high-level government meetings, the BBC understands.New Tory party chairman Brandon Lewis told the BBC the government was keeping “a very close eye on this”.The key government contractor has debts of £1.5bn, including a £587m pension shortfall.It is involved in major projects such as the HS2 high-speed rail line, as well as managing schools and prisons. Simon Jack: Carillion’s uncertain future
Where did it go wrong for Carillion?
The firm is trying to reach an agreement with creditors, but sources have said the firm has a “matter of days” as it teeters on the edge of collapse.The consultancy EY has been put on notice in case the company falls into administration.On Friday, reports that creditors had rejected a potential rescue plan sent Carillion’s shares down by more than 28%.
HS2 Building part of the high-speed rail line between London, Birmingham, Leeds and Manchester
MoD homes Maintains 50,000 homes for the Ministry of Defence
Schools Manages nearly 900 buildings nationwide
Network Rail Second largest supplier of maintenance services
Prisons Holds £200m in prison contracts
Mr Lewis told the BBC the government is “making sure all plans and contingency plans are in place”.”But it is a going concern… and hopefully they’ll be able to work with their partners to get the working capital they need to continue providing important services,” he told the Andrew Marr Show.Government bailout?Mr Lewis refused to be drawn on whether the government would bail Carillion out.”It’s a very commercially sensitive situation so I wouldn’t comment further than to say I would hope to see that the working capital that they need will be there working with their partners,” he said.Labour peer Lord Adonis tweeted that the government has “got questions to answer about propping up Carillion with contracts long after its problems clear. Looks like another Grayling bailout!”Last summer Transport Secretary Chris Grayling awarded Carillion part of the contract to build HS2, a week after the company had issued a profits warning and its chief executive had departed. Lord Adonis resigned as chair of the government’s National Infrastructure Commission in December, blaming in part what he described as “the Transport Secretary’s indefensible decision to bail-out the Stagecoach/Virgin East Coast rail franchise”.Liberal Democrat leader Sir Vince Cable has urged the government not to agree to a taxpayer-funded bailout for Carillion. Alastair Stewart, a construction and property analyst at Stockdale Securities, said none of the solutions involving the government were “particularly palatable”.”There’s a number of ways in which the government can get involved but politically none of them are particularly palatable,” said.”The biggest intervention they could make is actually take a stake in the company as part of raising a large amount of capital, but they’ll look back and look at the background of Lloyds and RBS.”Share price plummetedCarillion, the UK’s second-largest construction company, employs 43,000 people worldwide, with about 20,000 of them in the UK.It specialises in construction, as well as facilities management and ongoing maintenance.As recently as 2016 it had sales of £5.2bn and until July 2017 its market capitalisation was close to £1bn.Since then, its share price has plummeted and it is now worth just £61m.
In December, it convinced lenders to give it more time to repay them.However, the company’s banks, which include Santander UK, HSBC and Barclays, are understood to be reluctant to lend it any more cash.Its problems stem in part from a string of risky contracts which have proved unprofitable. It also faced payment delays in the Middle East that hit its accounts.Last year, it issued three profit warnings in five months and wrote down more than £1bn from the value of contracts.It has worked on high-profile projects, including the Battersea Power station redevelopment and the Anfield Stadium expansion.However, it is also the second largest supplier of maintenance services to Network Rail and maintains 50,000 homes for the Ministry of Defence, manages nearly 900 schools and manages roads and prisons.The concern is that if it were to collapse these key public sector services could suffer a lot of disruption.