End of the road for Carillion: New Lincoln Eastern Bypass contractors sought

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Lincolnshire County Council is considering who will carry out the £99 million Lincoln Eastern Bypass project after construction giant Carillion was forced into liquidation.

The news has left their £53 million contract wide open to options.

Delays of at least a few months are expected while Lincolnshire County Council scrambles to find a replacement.

Richard Wills, Executive Director for Highways, said: “The most likely situation is that we will appoint a new contractor to manage and deliver the construction element of the scheme; however, we’ll be looking at all of the potential options over the coming days.

“To date, Carillion has only completed about 10% of the work awarded to them.

“They haven’t started any of the really big and difficult work yet. This is good as it means it will be much easier for another contractor to step in once appointed.”

He added that the company had so far been paid £5 million of the contract and is still owed £200,000 for work in arrears.

Carillion will continue some work on the bypass for the foreseeable future, but the council said the situation is “constantly changing”.

The Wolverhampton-based construction giant, which employs around 43,000 people, 20,000 in the UK, entered liquidation on the morning of Monday, January 15 after talks with lenders and the government fell through.

Carillion had raked up more than £900 million in debts and a £587 million pension deficit. It had filed a profit warning back in July last year.

Reading the signs

Despite the company’s rising debts and its share price plummeting by 90%, Lincolnshire County Council had previously stated they had no reason to believe the company’s difficulties would affect the bypass.

Councillor Richard Davies, executive member for highways at the council, said: “We started the process of appointing Carillion over two years ago when share prices were good and there were no profit warnings.

“They were announced as our preferred contractor in October 2016 and were officially awarded in December 2016.

“The first profit warning didn’t come until the middle of 2017 and, once a contract has been awarded, it can’t be easily terminated.

“Despite going into liquidation, the process is being treated as administration due to Government involvement which means Carillion will carry on with some of their works as planned until new instruction is given.”

Lincolnshire County Council is conducting an ongoing investigation into the next stage in appointing the contract.

The bypass comprises a 7.5 km single carriageway road which links the A158 Wragby Road to the A15 at Bracebridge Heath.

It was designed to cut congestion in the city and add £600 million to the value of the Lincolnshire economy.

The other companies previously shortlisted for the project were:

  • Hochtief UK
  • John Sisk and Lagan (joint venture)
  • John Graham and Graham Farrans (joint venture)

‘Small suppliers must be paid’

Unions, small business organisations and lawyers are now calling for action to secure the future for thousands of workers, as well as guarantees that tax payers will not foot the bill.

Experts have warned that smaller firms have been put in jeopardy and that more jobs are at risk than those directly employed by Carillion.

Responding to construction giant Carillion going into liquidation, Federation of Small Businesses (FSB) National Chairman Mike Cherry, said:

“It is vital that Carillion’s small business suppliers are paid what they are owed, or some of those firms could themselves be put in jeopardy, putting even more jobs at risk besides those of Carillion’s own employees.

“These unpaid bills may well go back several months. I wrote to Carillion back in July last year to express concern after hearing from FSB members that the company was making small suppliers wait 120 days to be paid.”

He added: “Public procurement must be much more small-business friendly, in which it is easier for small firms to navigate the system and the Government should prioritise meeting its target of at least one third of taxpayer-funded contracts going to smaller firms.”

UNISON general secretary Dave Prentis said workers needed answers: “Staff need assurances about whether they have a job, who will pay their wages, and what’s going to happen to their pensions.

“The government needs to move quickly to bring these contracts back in-house – to safeguard our services and to protect the many staff in schools, hospitals, local authorities and libraries.”