UK government steps in as Carillion forced into compulsory liquidation

Carillion officials made a final rescue appeal to its lending banks on Sunday night after the government refused to rescue the struggling construction and services company. (Reuters)
Updated 15 January 2018
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UK government steps in as Carillion forced into compulsory liquidation

LONDON: Britain’s Carillion collapsed on Monday after its banks lost faith in the construction and services company, throwing hundreds of major projects into doubt and forcing the government to step in to guarantee vital public services.
Carillion was forced into compulsory liquidation after costly contract delays and a slump in new business left it at the mercy of its lenders and battling a ballooning debt pile.
The demise of the 200-year-old business poses a major headache for Theresa May’s government which has employed Carillion to work on 450 projects including the building and maintenance of hospitals prisons, defense sites and the country’s new superfast rail line.
“In recent days we have been unable to secure the funding to support our business plan and it is therefore with the deepest regret that we have arrived at this decision,” Chairman Philip Green said.
“This is a very sad day for Carillion, for our colleagues, suppliers and customers that we have been proud to serve over many years.”
Employing 43,000 people around the world, including 20,000 in Britain, Carillion has been fighting for survival since July when it revealed it was losing cash on several projects and had written down the value of its contract book by £845 million.
With banks refusing to accept the group’s latest attempt to restructure, May’s senior ministers met around the clock in recent days, under pressure from the opposition Labour Party and unions not to use taxpayer money to prop up the failing company.
Carillion has debt and liabilities of £1.5 billion with creditors that include banks RBS, Santander UK, HSBC and others. It has a pension deficit, included within that figure, of £580 million.
David Lidington, the minister in charge of the Cabinet Office which oversees the running of government, said his first priority was to ensure that public services continued. He urged the company’s staff to continue to work and said the government would pay their salaries.
Some contracts handled by Carillion would go to alternative providers, he added.
The company’s collapse comes at a difficult time for the government as it negotiates its exit from the European Union.
“It is regrettable that Carillion has not been able to find suitable financing options with its lenders but taxpayers cannot be expected to bail out a private sector company,” Lidington said in a statement.
“For clarity, all employees should keep coming to work, you will continue to get paid. Staff that are engaged on public sector contracts still have important work to do.”
Labour’s business spokeswoman Rebecca Long-Bailey called for a full investigation as to why the government continued to award Carillion contracts when it was clear it was in trouble.
“This company issued three profit warnings in the last six months yet despite those profit warnings the government continued to award government contracts to this company,” she told BBC TV.
“We’re ... asking for a full investigation into the government conduct of this matter.”
Spun out of Tarmac nearly 20 years ago and having bought Alfred McAlpine in 2008, Carillion has worked on key construction projects including London’s Royal Opera House, the Suez Canal road tunnel and Toronto’s Union Station.
In July last year it won contracts to build Britain’s new High Speed 2 rail line, a major project that will better connect London with the north of England.


India’s richest man to battle Amazon, Walmart in e-commerce

Updated 5 min 7 sec ago
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India’s richest man to battle Amazon, Walmart in e-commerce

  • The businessman plans to start his e-commerce business in Gujarat and then expand into the rest of India
  • He says his new e-commerce platform will help enrich small retailers and shopkeepers in Gujart

MUMBAi: Asia’s richest man Mukesh Ambani announced details of a new online shopping platform Friday that will see his oil-to-telecoms conglomerate take on Amazon and Walmart in India’s burgeoning e-commerce market.
Ambani, the chairman of Reliance Industries, said the company’s telecoms and consumer businesses planned to roll out the venture in the western state of Gujarat before expanding across India.
“Jio and Reliance Retail will launch a unique new commerce platform to empower and enrich our 12 lakh (1.2 million) small retailers and shopkeepers in Gujarat,” Ambani told a summit attended by Prime Minister Narendra Modi.
Ambani, 61, has been drip-feeding his e-commerce plans for India over the past few months in announcements that are no doubt being keenly watched by US giants Amazon and Walmart.
Reliance shook up India’s telecoms market in September 2016 when it launched its 4G Jio network with free voice calls for life and vastly cheaper data.
The launch sent the profits of other mobile players spiralling downwards and sparked consolidation across the industry as rivals scrambled to match Reliance’s deep pockets.
Amazon and leading Indian e-tailer Flipkart, which was bought by Walmart for $16 billion last year, have been expanding aggressively to gain a bigger slice of India’s growing online customers.
They have incurred huge losses along the way, however, and analysts say that Reliance’s entry into the e-commerce sphere will make their jobs even harder.
India’s e-commerce sales are expected to triple between now and 2022, when they are likely to pass the $100 billion mark, according to recent research by industry body NASSCOM and PricewaterhouseCoopers.
The rise is being fuelled by greater smartphone penetration, in part thanks to Jio, and a rising middle class with more disposable income.