Construction giant Carillion – which serves 32,000 meals a day to pupils at more than 200 schools through its catering arm Food & More – has gone into liquidation.
The company provides meals as well as facilities management and maintenance services to schools in Redcar, Cleveland, Leeds, Barnsley, Tameside, Oxfordshire, South Tyneside and Gateshead.
The government is providing funding to maintain the public services run by Carillion after talks failed to reach a deal that could save the UK’s second biggest construction company.
Carillion ran into trouble after losing money on big contracts and running up debts of about £1.5b.
Oxfordshire County Council has taken over services formerly provided by Carillion at 90 schools in the county and said it had been “planning for the possibility of Carillion’s collapse for some time”.
Alexandra Bailey, Oxfordshire County Council’s director for property, assets and investment, said: “We expect school staff will be in work as normal today but if this doesn’t happen we will provide school lunches to schools needing support, and the fire service are on standby to deliver them. We are confident no child will go hungry at school.”
Carillion entered compulsory liquidation after talks with banks, the government, pension authorities and shareholders over the weekend failed to find any solution to it’s £900m debt and £590m pension deficit.
Carillion 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. Over recent months huge efforts have been made to restructure Carillion to deliver its sustainable future and the Board is very grateful for the huge efforts made by Keith Cochrane, our executive team and many others who have worked tirelessly over this period.
“In recent days however 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. We understand that HM Government will be providing the necessary funding required by the Official Receiver to maintain the public services carried on by Carillion staff, subcontractors and suppliers.”
The Official Receiver has been appointed by the court as liquidator along with partners at PwC, appointed as special managers.
Cabinet Office Minister David Lidington said: “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.
“Since profit warnings were first issued in July, the government has been closely monitoring the situation and has been in constructive discussion with Carillion while it sought to refinance its business. We remained hopeful that a solution could be found while putting robust contingency plans in place to prepare for every eventuality. It is of course disappointing that Carillion has become insolvent, but our primary responsibility has always been keep our essential public services running safely.”
Kevin Courtney, joint general secretary of the National Education Union is calling for the Government to rethink the way it deals with public sector contracts.
He said: “Parents and pupils will be alarmed at the prospect that school lunches may suddenly not be provided and their schools may not be clean and safe. While the Government must protect the employment and pensions of Carillion’s public sector workers it must also take a long hard look at its encouragement of private sector involvement in schools and the unnecessary risks being taken with children’s education and wellbeing.
“The government’s ideology is bust. It can no longer say with any credibility that the private sector can do a better job of running our public services. It will no longer have public support when taxpayers look set to bail out the private sector yet again. The country is questioning not only why the government kept awarding a struggling company contacts but why it was also approved as a Multi Academy Trust to run schools.”
An inquiry named ‘Sourcing public services: lessons to be learned from the collapse of Carillion’ has been launched to look in to outsourcing by the Britain’s Public Administration and Constitutional Affairs Committee.
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