LONDON — The U.K. government is facing questions over why it awarded contracts to the troubled outsourcing company Carillion, which filed for compulsory liquidation on Monday.
David Lidington, the minister for the Cabinet Office, said the government would provide funding to maintain public services after crisis talks over the weekend failed to raise enough funds to keep the government contractor afloat.
“It is regrettable that Carillion has not been able to find suitable financing options with its lenders but taxpayers cannot be expected to bail out a private sector company,” Lidington said in a statement, adding that employees should still go to work and that they would be paid.
Carillion is Britain’s second-largest construction and outsourcing firm, holding public contracts equating to billions of pounds and employing 43,000 people, with around 20,000 of them in the U.K.
Asked whether the government would review its due diligence procedures in awarding contracts, the prime minister’s official spokesman said that “if there are lessons to be learned, then they will be.”
The spokesman added that there was no risk to the flagship HS2 railway project — a high-speed rail network from London to Birmingham and to Manchester and Leeds — that Carillion, alongside two other firms, was awarded a contract to deliver sections of in July.
Carillion’s announcement was “obviously extremely regrettable,” the spokesman added.
“We understand that some members of the public and staff in particular are going to be concerned … We stand ready to help them in the usual way. It’s obviously too early to say what the outcome will be in relation to each individual contract which Carillion holds but we will provide what help is needed.”
British ministers are under increasing pressure to explain why significant public contracts were awarded to the company despite red flags about its finances, such as its first profits warning last year, with Transport Secretary Chris Grayling singled out for criticism.
Shadow Business Secretary Rebecca Long-Bailey told the BBC Radio 4 Today program she expected the government to make a statement in the House of Commons on Monday.
Jon Trickett, Labour’s shadow minister for the Cabinet Office, urged the government to “act quickly to bring these public sector contracts back in-house” and called for a “serious investigation” into the government’s handling of the matter.
Vince Cable, the Liberal Democrat leader and a former business secretary, also said a public inquiry was needed to look into some of the “very questionable decisions made in the past few months.”
The government should take responsibility or re-tender the big contracts to protect jobs and minimize the damage to the capacity of the construction industry, Cable said.
“Carillion’s collapse raises grave concerns about jobs, the delivery of public services and the way Government conducts its business,” public accounts committee Chair Meg Hillier said in a statement Monday.
“Government now faces a stark choice: Bail Carillion out or let public services and projects suffer,” she added. “Either way, taxpayers will get a raw deal … Government has serious questions to answer about its role in allowing taxpayers’ exposure to escalate to this point.”
Lidington insisted Monday the government had been closely monitoring the situation since profit warnings were first issue in July and said there had been “constructive discussion” with Carillion while it sought to refinance its business.
“We remained hopeful that a solution could be found while putting robust contingency plans in place to prepare for every eventuality,” Lidington said in the statement.
This story has been updated with additional information.