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  HOME | Business & Economy (Click here for more)

Collapse of Carillion Fuels UK Debate about Public Role of Private Companies

LONDON – One of the United Kingdom government’s biggest contractors entered liquidation proceedings on Monday after weekend rescue talks collapsed, a high-profile failure that comes amid a renewed debate in Britain over the role of private-sector companies in the delivery of public services, according to Dow Jones.

Carillion PLC said its board agreed to wind down the company after failing to reach an agreement with its lenders on the restructuring of its debts, a move that caps months of speculation about its future following poorer than expected results.

The company, which employs 43,000 people worldwide, provides a range of services in the UK on behalf of the government, ranging from building and managing hospitals to cleaning and providing food at schools.

It also plays a key role in the construction of major infrastructure projects, including a new high-speed rail line linking London to Birmingham.

Signs of trouble at the company had been brewing for some time, Dow Jones added.

In Nov., Carillion issued its third profit warning in less than six months and said it expected to breach its financial covenants before the start of 2018.

It had already said some contracts weren’t making as much money as expected, adding to its borrowings.

It also has a large pension deficit and the UK government scrambled Monday to contain any fallout.

David Lidington, the minister for the cabinet office, which is responsible for the day-to-day running of government, said the services Carillion provides through its public-sector contracts won’t be interrupted, as the government will pay the official receiver overseeing the company’s liquidation to ensure they continue.

He ruled out a full-scale bailout of the firm, Dow Jones added.

“Taxpayers can’t be expected to bail out a private-sector company,” he said in an interview with the British Broadcasting Corp.

He added that many of Carillion’s contracts were joint ventures with other firms and they would be expected to take on the extra work.

Carillion’s collapse adds fuel to a renewed debate in the UK over the ownership and funding of public services, Dow Jones added in its report.

The main opposition Labour Party fought last year’s June election on a platform that committed it to widespread nationalization of railways, utilities and other industries.

Labour Party leader Jeremy Corbyn has been a longtime critic of private-sector involvement in the provision of public services in the UK.

The GMB trade union, which represents more than half a million workers in the public and private sectors in Britain, said Monday the episode showed that there is “no place for private companies who answer to shareholders, not patients, parents and service users in our public services.”


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