HomePeopleThe Carillion effect

The Carillion effect

Listen to this article

Several weeks on from the original announcement, the story of Carillion’s collapse and its reverberations around the industry continue to be felt.

On 15 January, the High Court appointed PricewaterhouseCoopers (PwC) as the Official Receiver to oversee the liquidation of Carillion. The company entered compulsory liquidation after failing to secure the funding it needed for its turnaround plan.

Prior to its demise, Carillion was the second largest supplier to Network Rail, receiving 5.1 per cent of Network Rail’s total spend in 2016-17.

Since then, there has been a series of announcements and statements indicating just how far and wide Carillion’s fall is being felt.

In the week following the announcement, numerous posts appeared on LinkedIn from Carillion employees, demonstrating the human impact of the Carillion story. Despite everything, many of the messages expressed pride in their work at Carillion and thanked colleagues for their support.

There have been some glimmers of good news for Carillion’s workforce. Network Rail has committed to paying Carillion staff working on its projects until at least mid-April. Kier has agreed to take 150 workers, including seven apprentices, through its joint venture with Carillion on HS2 and Cleshar, which has taken over the London Overground East London Line maintenance contract, has employed Carillion’s maintenance staff on their existing terms and conditions.

Like this story? Follow us on Facebook to keep up to date on rail industry news

Questions still remain over pay and pensions after it revealed that there was a sizeable deficit in Carillion’s pension scheme. On 2 February, PwC said it had successfully found new employment for 919 staff members, although more than 800 employees have been made redundant so far.

The supply chain is also seeking clarity. Network Rail has confirmed that it will pay Carillion’s suppliers for work carried out over Christmas up to the start of the liquidation proceedings. Several banking groups have set up lending packages worth a total of £200 million to support SMEs, but there is still uncertainty for many suppliers.

The Federation of Small Businesses said the fall of Carillion should start a conversation around payment terms and supply chain resilience. The Rail Industry Association (RIA) said it was currently working to support rail industry suppliers caught up in the fallout.

“The main concern for the Railway Industry Association (RIA) is ensuring rail staff, skills and capabilities are not lost, that there is no break in the contracts currently underway, and that the many threatened SMEs working on projects can survive and find new work. We hope that all partners involved will be able to work together to minimise redundancies, disruption to the pipeline of rail projects and loss of valuable, skilled workers, and specialist companies.

“We would also like to reassure those concerned about the ability of the rail supply chain to deliver future projects. The UK rail supply sector is highly dynamic and will come together to ensure these projects are delivered. We are already starting to see various organisations involved in Carillion schemes putting plans in place to ensure the smooth transition of workloads. This is very welcome and, along with government support, will ensure rail suppliers continue to deliver for the UK.”

History of Carillion

The Carillion name first appeared in 1999 when Tarmac’s construction and services operations were separated from the company’s quarrying and road-surfacing business.

Carillion expanded in the latter 2000s, acquiring Mowlem in 2006 and McAlpine in 2008. McAlpine, among other things, built the Eden Project in Cornwall.

Major projects delivered by Carillion include building the Tate Modern in London, the Copenhagen Metro and the Channel Tunnel Rail Link into St Pancras station. Tarmac had been part of the Anglo-French consortium that built the Channel Tunnel itself.

Read more: Inquiry launched into East Coast franchise failure