Tue, 23rd Apr 2019
There are hundreds of public sector contracts still running that had been assigned to Carillion, and with the failure of the company, the government has been forced to step in and pay out Treasury funds to keep the public sector work going. The projects are going to cost millions of pounds per day in temporary funding.
The failed company held 450 contracts with the government in the UK, representing 38 percent of its annual revenue according to the company’s last accounts. Assuming the contracts were not making a loss, this means that the government will need to fund almost £2 billion in annual revenues, on a temporary basis. This amounts to £5.4 million per day.
The government is already paying for the increased costs of the Official Receiver, and a large team of accountants. The figures do not include the special funding extended to Carillion’s sub-contractors focused on private sector projects either.
Carillion entered liquidation after EY and PwC concluded that the company did not have enough funds to go through insolvency. Interim boss Keith Cochrane reports that the company had just £29 million in cash left when it failed, and £1 billion in assets. The company had been relying on banks offering a flexible credit line to make payments, but was on fragile ground with its cash flow, and has not been able to find financing options with its lenders to stay afloat after one of those lines of credit was removed.