QUESTIONS have been raised over the continued awarding of public contracts to struggling construction giant Carillion – despite multiple profit warnings.
Carillion, the UK’s second-largest construction company, is currently struggling under a £1.5 billion mountain of debt and plunging share prices, with fears it could collapse.
The firm is a major government contractor involved of a range of key projects such as the HS2 rail line and a new £745 million Aberdeen bypass.
READ MORE: Carillion feared to be on verge of collapse after Whitehall rescue talks fail
Despite issuing three profit warnings in the last six months, the UK Government awarded three separate contracts to Carillion over that period, worth nearly £2 billion in total.
It comes amid claims hundreds of workers on the Aberdeen bypass had Christmas “bonus” payments withdrawn at the last minute – sparking fears the move was linked to Carillion’s financial difficulties.
Labour said it was government policy to designate a company as “high risk” if they issue a profit warning.
READ MORE: Carillion feared to be on verge of collapse after Whitehall rescue talks fail
Shadow cabinet office minister Jon Trickett MP added: “Alarm bells have been ringing for over six months about the state of Carillion’s finances, so the Government must come forward and answer questions on exactly what due diligence measures were undertaken, before awarding contracts to Carillion worth billions of taxpayers' money.
“In the meantime - as emergency meetings take place between officials - employees of Carillion, pension holders and taxpayers will want assurances that financial protections are in place in the event of the supplier experiencing further financial difficulties.
"Labour urges the Government to stand ready to intervene and bring these crucial public sector contracts back in-house. The government cannot outsource its responsibility and duty of care to these workers and vital public sector projects."
READ MORE: Carillion feared to be on verge of collapse after Whitehall rescue talks fail
It is understood the Scottish Government has been sounding out developers to step in and plug the gap if Carillion collapses.
As well as the £745m Aberdeen bypass, the firm is involved in plans to extend platforms at Edinburgh Waverley station to make way for longer electric trains.
Union leaders said fears that Carrillion was not a “steady ship” had been around for some time.
Unite said hundreds of agency workers employed on the Aberdeen bypass project were told they would not receive subsistence payments the week before Christmas.
READ MORE: Carillion feared to be on verge of collapse after Whitehall rescue talks fail
The payments – equal to around £36 a night – help employees keep their lodgings over the festive holidays, meaning they don’t have to seek out new accommodation when they return to work.
John Clark of Unite Scotland said the cash had been provided for the last two years, but workers were told they would not receive it this year, with no explanation given.
He said: “Out of the blue at Christmas payments made to workers over the festive season to help them keep their lodgings over the holidays were withdrawn.
“Today’s news makes you wonder if that happened because Carillion could no longer write the cheques.”
He added: “It’s a shame for everybody, getting this hung on them a week before Christmas. People make plans, and this is just the carpet being pulled from under their feet.”
Mike Russell MSP insisted work on the Aberdeen bypass would continue irrespective of what happened to Carillion.
He told the BBC’s Sunday Politics Scotland: “We understand that that work is secure and will be secure, and obviously that’s of great importance.”
READ MORE: Carillion feared to be on verge of collapse after Whitehall rescue talks fail
Conservative party chairman Brandon Lewis said ministers were keeping a very close eye on the crisis, with crunch talks taking place with officials from across Whitehall.
A Transport Scotland spokesman said any impact on the Aberdeen bypass would be “mitigated” because Carillion’s construction partners “remain fully responsible for the completion of the works”.
He added: “It is standard practice for the subsistence costs of subcontractors and agency workers to be paid only for the periods when they are working away from home.
“The terms and conditions of each individual’s subsistence are a private matter between themselves and their employer and it would be inappropriate for us to comment further.”
READ MORE: Carillion feared to be on verge of collapse after Whitehall rescue talks fail
Carillion said it would not be appropriate to respond to the payment claims independently, as the Aberdeen bypass is being delivered by a consortium composed of Balfour Beatty, Galliford Try and Carillion. The joint venture team could not be reached for comment.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here