Monday, January 15, 2018

News: Tram-train contractor Carillion hits the buffers


Carillion, a leading international integrated support services business, has entered compulsory liquidation with immediate effect. The firm is the lead contractor on the delayed Sheffield-Rotherham tram-train project.

The announcement came after the company, which specialises in construction and employs more than 19,000 in the UK, held crunch discussions with a range of financial and other stakeholders regarding options to reduce debt and strengthen the Group's balance sheet.

The Government were also involved in talks as it is reported that £1.7bn - a third of its revenue - comes from state contracts. Carillion asked stakeholders for limited short term financial support to enable it to continue to trade whilst longer term engagement continued.

An update to the stock exchnage said: "Despite considerable efforts, those discussions have not been successful, and the board of Carillion has therefore concluded that it had no choice but to take steps to enter into compulsory liquidation with immediate effect. An application was made to the High Court for a compulsory liquidation of Carillion before opening of business today and an order has been granted to appoint the Official Receiver as the liquidator of Carillion.

"We anticipate that the Official Receiver will make an application to the High Court for PricewaterhouseCoopers LLP to be appointed as Special Managers, to act on behalf of the Official Receiver, and we further anticipate that an order will be granted to that effect."

Philip Green, chairman of Carillion, 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."


Carillion, which also has a contact centre in Sheffield (that was previously in Rotherham) was selected by Network Rail as the lead contractor for the innovative Sheffield-Rotherham tram-train project.

The Department for Transport (DfT) is the client in the project which will see vehicles use both the tram and heavy rail network to connect Sheffield city centre, Meadowhall, Rotherham town centre and Parkgate.

South Yorkshire Passenger Transport Executive (SYPTE) is responsible for the delivery of all of the light rail modifications, rail replacement and procurement of the vehicles. Network Rail is separately responsible to DfT to deliver the heavy rail modifications required for the project.

Work carried out so far includes a new 400m piece of track near Tinsley to connect the tram lines and rail lines and work to improve signalling. Significant work was also carried out to raise College Road bridge at Rotherham Central.

A revised construction programme will see Tram Train infrastructure complete during Summer 2018. Work is yet to be completed on the new Tram Train platforms at Rotherham Central and Parkgate and on the installation of the overhead power lines.

A report from the National Audit Office (NAO) criticised the management of the trial when it revealed that by December 2016, the cost of the works, which had been given an initial estimate of £15m, had quadrupled to £75.1m, pushing the overall cost of the scheme over £100m.

First mentioned in 2009, Network Rail signed an early engagement contract with Carillion in February 2013 to help design the works and began negotiations on the detailed design and construction contract in November 2014. This was signed in August 2015.

The NAO report showed that Network Rail agreed with an independent review that said that "the early involvement of Carillion in the design process did not work well."

As the project was delayed and over budget the Government recommended cancelling the project in 2016. The Rail Minister (Paul Maynard) was also presented with options to continue with additional funds, continue without further funds, or to re-tender the heavy rail infrastructure works, either taking the work away from Network Rail and Carillion or asking Network Rail to re-tender.

The Minister did not accept the recommendation to cancel the project due to the potential wider interest from other cities and, locally, on providing improvements in connectivity in South Yorkshire. Network Rail reallocated an additional £26.5m from other areas to ensure the project could be completed.

Sarah Champion, MP for Rotherham, said: "The delivery of the tram – train link has been disastrous from start to finish. With repeated failures to meet deadlines and costs having quadrupled, the scheme now faces further uncertainty with the collapse of its main construction contractor.

"Carillion's collapse is yet another blow to the delivery of the project and the Government must provide reassurance that it will not result in further delays in service starting operation.

"Carillion's collapse is of course deeply worrying for its thousands of employees, many of whom are based in South Yorkshire. The Government needs to be prepared to bring public contracts back into state control and act quickly to provide reassurances to Carillion's workers."

Carillion website

Images: Network Rail


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