Construction company Carillion, which went into insolvency yesterday, only had Â£29m before it was liquidated: 2.2% of the total Â£1.29bn debts it had incurred.
The company’s interim chief executive Keith Cochrane said the financial situation was so dire that accountancy firms PwC and EY both refused to become administrators concerned that they wouldn’t be paid. The company’s valuation collapsed from over Â£1bn at the beginning of 2017 to Â£70m.
Carillion’s investors have been told to expect a near total loss, less than a 1% return rate according to some estimates, and contractors to wait to see what can be recouped from the company’s assets. The UK government has agreed to honour public service contracts but those in the private sector will find out in the next day whether Carillion’s clients will continue to pay them.
In the final days before the collapse, Carillion asked the UKÂ government for a “guarantee on limited short-term funding” that would enable it to carry out its restructuring plans. However, the UK government refused this request and told the company it would be supporting liquidation.
Business Secretary Greg Clark has requested the Insolvency Service to “fast track” their investigation into Carillion’s directors both current and former. He will also be meeting with representatives for thousands of Carillion’s subcontractors as well as union officials. Criticism has been levelled at ministers who continued to award contracts to the company, even when it reported three profit warnings in five months over the summer of 2017.
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