World News

Carillion Collapse Could Lead to Thousands of Job Losses in U.K.

Posted January 17, 2018 9:26 a.m. EST

LONDON — The fate of thousands of British workers hung in the balance Wednesday after the collapse of Carillion, a major construction and services company with a vast network of subcontractors.

Work has slowed sharply on a range of Carillion projects, and some subcontractors, unsure if they will keep working and be paid, have begun curtailing assignments. The cracks appearing in Carillion’s network of services to the public and private sectors amplified fears that its failure could lead to the downfall of other companies that relied on it, putting tens of thousands of people out of work.

The demise of Carillion, which entered liquidation Monday, poses a political as well as economic challenge to the Conservative government of Prime Minister Theresa May, which declined to bail out the company. Even after signs emerged that the company was financially troubled, the government continued to award Carillion major contracts.

Carillion, with about 20,000 employees in Britain, reached into myriad facets of British life, as well as operating overseas. It not only managed or co-managed major, unfinished construction projects for the government, like a high-speed rail link among English cities; a hospital near Birmingham; another hospital, in Liverpool, and a highway near Aberdeen, in Scotland. Carillion also helped operate an array of government services, including running prisons and delivering school lunches.

The government has vowed that all public-sector work by Carillion will continue and that the company’s workers will be paid, adding that other contractors were being sought to take over those jobs. But the government has said that it could not ensure that thousands of the company’s employees working on private-sector projects would be paid past Wednesday.

“That’s a scandal,” Tim Roache, the leader of GMB, a major trade union, told BBC Radio.

He said that the government should ensure a longer period of pay for those workers, while other companies explored taking on Carillion contracts and Carillion employees.

The company had about $1.3 billion in debt and an $800 million pension deficit.

Carillion’s subcontractors, who complained that the company was behind on its bills, face being paid only a small fraction of what they were owed before the collapse. PwC, also known as PricewaterhouseCoopers, the firm handling the liquidation, has told the subcontractors, who employ tens of thousands in Britain, to continue working for now, pledging that “you will get paid for goods and services you supply” after Monday’s liquidation filing, but that those contracts could be terminated.

“Over the coming days, we will review supplier contracts and we’ll contact you concerning these soon,” it said.

But some subcontractors are leery of even the short-term assurances. Shaun Weeks, who runs a cleaning company, told the BBC that it had stopped sending one of its workers to a prison, under a contract with Carillion, until it knew more.

At the construction site of the new Royal Liverpool University Hospital — where activity slowed sharply Monday and some workers reported finding the site locked — work resumed Tuesday, but some subcontractors said they expected delays as Carillion’s obligations were reviewed.