Official spending watchdog: Carillion collapse will cost the taxpayer more than £148m
2 min read
The collapse of construction giant Carillion will cost the taxpayer around £150m, according to official spending watchdogs.
The National Audit Office said the liquidation would set the Cabinet Office back £148m but the final cost to the public would be even higher due to other related costs.
Carillion, which held a string of public sector contracts, went bust at the start of the year after ending up mired in debt and owing billions to its suppliers.
More than 2,300 workers have ended up redundant in the fallout, while some of its projects - including two PFI hospitals - have been mothballed.
The Cabinet Office has already set aside some £150m for the liquidation. Today the NAO said the Government would use up that cash while the taxpayer would be on the hook for even more.
“The estimated £148m loss is subject to a range of uncertainties, and it will take a long time to establish the final actual cost,” a new report by the watchdog said.
“The total cost to the taxpayer will be higher than this because some public sector bodies are paying a 20% premium for post-liquidation services and some customers will incur costs in replacing Carillion as a contractor.”
The £148m sum is in fact lower than an earlier rough estimate by the Cabinet Office, which suggested the liquidation could cost as much as £347m, and far lower than reports it could be £1bn.
Elsewhere, the NAO report said the profit warning Carillion issued in July 2017 came as “a surprise” to the Government, since the company had previously reported being in good financial health.
It added that ministers refused to apply the highest risk rating to the firm in late 2017 because it convinced them doing so would make matters worse.
NAO boss Amyas Morse said: “When a company becomes a strategic supplier, dependencies are created beyond the scope of specific contracts.
“Doing a thorough job of protecting the public interest means that government needs to understand the financial health and sustainability of its major suppliers, and avoid creating relationships with those which are already weakened.
“Government has further to go in developing in this direction.”
Public Accounts Committee chair Meg Hillier said: “The collapse is expected to cost the taxpayer more than £148 million and the effect on supply chain businesses and Carillion staff underlines the human impact of such a collapse.”
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