Cabinet ministers have concluded a crisis meeting about keeping vital public services going after the collapse of contractor Carillion.
The construction giant, which provides services for schools, prisons and hospitals, has gone into liquidation.
The two-hour emergency Cobra meeting was to discuss “how contingency plans are operating,” Downing Street said.
Meanwhile, Labour leader Jeremy Corbyn attacked government policies and called Carillion a “watershed moment”.
In a video released on social media, he said: “In the wake of the collapse of the contractor Carillion, it is time to put an end to the rip-off privatisation policies that have done serious damage to our public services and fleeced the public of billions of pounds.”
Carillion ran into trouble after losing money on big public sector contracts and running up huge debts of around £1.5bn.
The government is stepping in to pay employees and small businesses working on Carillion’s public contracts, said cabinet minister David Lidington.
“The action we have taken is designed to keep vital public services running rather than to provide a bailout on the failure of a commercial company,” Mr Lidington told parliament.
Carillion, the UK’s second biggest construction firm, was also involved in major projects such as the HS2 high-speed rail line.
The firm has 450 government contracts, including maintenance for prisons and hospitals, as well as dinners and cleaning for hundreds of schools.
It is also the second biggest supplier of maintenance services to Network Rail, and it maintains 50,000 homes for the Ministry of Defence.
The government has disclosed that it awarded eight contracts to the company after it issued profit warnings – six of which were joint ventures with other firms.
In his video message, Mr Corbyn linked the crisis to the outsourcing of public services to private companies.
“This is a watershed moment,” the Labour leader said. “Across the public sector, the outsource-first dogma has wreaked havoc.
“Often it is the same companies that have gone from service to service, creaming off profits and failing to deliver the quality of service our people deserve.”
Carillion has 43,000 staff worldwide, including 20,000 in the UK.
There are also thousands of small firms that carry out work on Carillion’s behalf – many of those have contacted the BBC with concerns about whether they will be paid.
One company, which provided services for Carillion’s prisons contract, told the BBC that it might fail if it is not paid the £80,000 owed to it.
A worker on the new Midland Metropolitan Hospital building, who wanted to only be identified as Philip, told the BBC: “Everyone on the site got told: ‘That’s it, go home.’ My company said, ‘You’ve been laid off.’
“They’ve literally locked the gate. They’ve told us we can get our personal tools off the site if they’re small, but that’s it.”
What happens next depends on the actions of a court-appointed official receiver. With the help of a team of experts from accountants PwC, the receiver will review Carillion’s business – a process which could take months.
The government could take some public services in-house, while other firms may take on some of Carillion’s other contracts.
Thousands of current and former staff have money in Carillion pension funds, which have a total deficit of almost £600m.
Those funds will now be managed by the Pension Protection Fund (PPF).
The PPF said: “We want to reassure members of Carillion’s defined benefit pension schemes that their benefits are protected by the PPF.”
Carillion might not be a household name, but over the years it has absorbed better-known businesses, including Mowlem and Alfred McAlpine.
It also has a big international business, including a huge construction project in Qatar related to the 2022 FIFA World Cup.
In addition it is a big supplier of construction services to the Canadian government.
Its biggest problems were cost overruns on three UK public sector construction projects:
- The £350m Midland Metropolitan Hospital in Sandwell: opening delayed to 2019 due to construction problems
- The £335m Royal Liverpool Hospital: completion date repeatedly pushed back amid reports of cracks in the building
- The £745m Aberdeen bypass: delayed because of slow progress in completing initial earthworks
Bernard Jenkin, the Conservative chairman of the House of Commons Public Administration Committee, said Carillion’s collapse “really shakes public confidence in the ability of the private sector to deliver public services and infrastructure”.
His committee is launching an inquiry into government outsourcing following the demise of Carillion.
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