Carillion in dire financial trouble.

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Sidney1st
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Carillion in dire financial trouble.

Post by Sidney1st » Fri Jan 12, 2018 7:55 am

http://www.bbc.co.uk/news/business-42656879" onclick="window.open(this.href);return false;

Announced debts of £1.5 billion approx and a pension fund deficit of approx £600 million, due to some really poor financial management or theft, they haven't worked out which yet.
They've also seen the company value drop by approx 90% to just £85 million.
This is the company that builds various public sector buildings and in line to build HS2.

Big question is should the government do more than save just the pension fund, should they save the company?
It's being suggested the company should be saved.

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Re: Carillion in dire financial trouble.

Post by ClaretDiver » Fri Jan 12, 2018 7:58 am

If a major organisation such as Carillion does not have checks and balances in place to stop a 1.5 billion debt whether through theft or otherwise then NO they should not be bailed out...simple as!
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Re: Carillion in dire financial trouble.

Post by ZizkovClaret » Fri Jan 12, 2018 7:58 am

Save the pension fund, but why save the company, let it fail and buy up the assets / contracts as a new vehicle

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Re: Carillion in dire financial trouble.

Post by box_of_frogs » Fri Jan 12, 2018 8:00 am

Having the ‘pleasure’ of them effectively being my landlord, I’m not surprised they are in trouble. Couldn’t organise a lash up in a brewery.
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Re: Carillion in dire financial trouble.

Post by Blackrod » Fri Jan 12, 2018 8:10 am

No they should not be bailed out. There are executives in place to make sure companies are run properly and they are paid accordingly.
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Re: Carillion in dire financial trouble.

Post by gavster » Fri Jan 12, 2018 8:23 am

The 1.5b debt is only an issue if they can’t service it from there turnover. It’s no so unusual if you think what they are financing to build. The pension gap however is a massive issue for them. The skeptic in me thinks they’re doing this to kill off the pension scheme

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Re: Carillion in dire financial trouble.

Post by Woonderbah » Fri Jan 12, 2018 9:08 am

Always gonna be in trouble once Fish left
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Re: Carillion in dire financial trouble.

Post by ClaretDiver » Fri Jan 12, 2018 9:13 am

Woonderbah wrote:Always gonna be in trouble once Fish left
Absolute gold.....laughed hard at this one!

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Re: Carillion in dire financial trouble.

Post by evensteadiereddie » Fri Jan 12, 2018 9:19 am

The number of Cabinet/Government ministers on the board of Carillion will probably determine the size of the bailout.

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Re: Carillion in dire financial trouble.

Post by ablueclaret » Fri Jan 12, 2018 9:21 am

It should be nationalised in that case.
Any Company the Government aids should become part owned by the state.

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Re: Carillion in dire financial trouble.

Post by wooooosh » Fri Jan 12, 2018 10:24 am

Woonderbah wrote:Always gonna be in trouble once Fish left
Very good.

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Re: Carillion in dire financial trouble.

Post by Hapag Lloyd » Fri Jan 12, 2018 10:37 am

ablueclaret wrote:It should be nationalised in that case.
Any Company the Government aids should become part owned by the state.
Great idea, nationalise a company that's managed to run up one and a half billion pounds worth of debt.

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Re: Carillion in dire financial trouble.

Post by houseboy » Fri Jan 12, 2018 10:38 am

Woonderbah wrote:Always gonna be in trouble once Fish left
Subtle, very subtle. But nice one.

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Re: Carillion in dire financial trouble.

Post by Sidney1st » Fri Jan 12, 2018 10:41 am

Hapag Lloyd wrote:Great idea, nationalise a company that's managed to run up one and a half billion pounds worth of debt.
Plus mis-managed it's pension fund.
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Re: Carillion in dire financial trouble.

Post by houseboy » Fri Jan 12, 2018 10:42 am

No help should be given to this dreadful company. I feel for those who may lose jobs or pensions or both but it couldn't happen to a nicer company. I used to work for a publisher who ran construction magazines and I spoke to many sub-contractors over the years and Carillion were (although not alone) one of the worst payers in the business, so much so that they would often see little companies go under before pay what they owed on time. A dreadful practice and fairly endemic in the trade but they were one of the worst.

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Re: Carillion in dire financial trouble.

Post by Walton » Fri Jan 12, 2018 10:48 am

The pension fund will be saved by the PPF.

Anyone over 65 will get 100% but see their increases capped.

Everyone else will get 90%, subject to the compensation cap of £38.5k a year, with long service cap applying to anyone with over 21 years service.

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Re: Carillion in dire financial trouble.

Post by Quickenthetempo » Fri Jan 12, 2018 11:04 am

It will be saved the biggest Tory company their is out there in construction. Horrible company.

As soon as Labour lost the General Election Carillion sprouted up everywhere, winning every major construction contract going.

It won't survive Labour getting back in though.

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Re: Carillion in dire financial trouble.

Post by Sidney1st » Fri Jan 12, 2018 11:22 am

Quickenthetempo wrote:It will be saved the biggest Tory company their is out there in construction. Horrible company.

As soon as Labour lost the General Election Carillion sprouted up everywhere, winning every major construction contract going.

It won't survive Labour getting back in though.
They seemed to do alright in the UK when Labour was in charge after a quick look at their history, especially with that PFI that Labour were happy to push through.

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Re: Carillion in dire financial trouble.

Post by clansman » Fri Jan 12, 2018 11:34 am

Nonsense to suggest they are a Tory Company and totally irrelevant. They won lots of work from Labour and Liberal local authorities.Not the first major construction company to get in a mess. But no bail out let the other majors pick over the bones if it comes to that. Miss priced contracts bad project management and going for ego jobs is a recipe for trouble.

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Re: Carillion in dire financial trouble.

Post by Quickenthetempo » Fri Jan 12, 2018 11:36 am

Sidney1st wrote:They seemed to do alright in the UK when Labour was in charge after a quick look at their history, especially with that PFI that Labour were happy to push through.
Only going off personal experience Sidney where it was Bovis Lend Lease and Laing O Rourke everywhere. Then our company started working for Carillion almost over night.

I was very naieve at the time of big companies and politics, but was assured Carillion would take over if the Tories won and they did.

Looks like they got too big for their boots.

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Re: Carillion in dire financial trouble.

Post by 1fatclaret » Fri Jan 12, 2018 1:31 pm

By continuing to award major construction projects to them, long after their dire financial position was made public, the government are already bailing them out. That's most definitely a strategic decision as its cheaper to bail out than see the various projects they're already engaged on stall or fail.

Any other contractor looking at their current pipeline will as a matter of course add 15 to 20 % to the price, just as a contingency.

Can't imagine many subcontractors will be sleeping too easy now, not with the 120 day payment terms they insist on. Yes, 3 months from approval of invoice you get your cash, unless you pay carillion to receive it early. Pay them for paying you, very collaborative way to work. Thank god we've got legislation in place to stop major contractors delaying payments to smaller ones.....

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Re: Carillion in dire financial trouble.

Post by 1fatclaret » Fri Jan 12, 2018 1:33 pm

Quickenthetempo wrote:Only going off personal experience Sidney where it was Bovis Lend Lease and Laing O Rourke everywhere. Then our company started working for Carillion almost over night.

I was very naieve at the time of big companies and politics, but was assured Carillion would take over if the Tories won and they did.

Looks like they got too big for their boots.

Not sure who you're company is Quicken, but Lend Lease and Laings are still very major contractors. The former tending to focus on major projects these days and the latter have a very tight supply chain that if you're not on, you won't see work from them.

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Re: Carillion in dire financial trouble.

Post by Sidney1st » Fri Jan 12, 2018 1:38 pm

1fatclaret wrote:
Can't imagine many subcontractors will be sleeping too easy now, not with the 120 day payment terms they insist on. Yes, 3 months from approval of invoice you get your cash, unless you pay carillion to receive it early. Pay them for paying you, very collaborative way to work. Thank god we've got legislation in place to stop major contractors delaying payments to smaller ones.....
3 months, or similar timescales is a common occurance from what I've seen.
I think Tescos did the same, I know some motor factors have done 60days.

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Re: Carillion in dire financial trouble.

Post by Quickenthetempo » Fri Jan 12, 2018 1:43 pm

1fatclaret wrote:Not sure who you're company is Quicken, but Lend Lease and Laings are still very major contractors. The former tending to focus on major projects these days and the latter have a very tight supply chain that if you're not on, you won't see work from them.
To be honest I was talking about from a few years ago.

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Re: Carillion in dire financial trouble.

Post by Quickenthetempo » Fri Jan 12, 2018 1:50 pm

Bovis Lend Lease went from the likes of Media city, Trafford centre extension Barton Square and Golden Square shopping centre in Warrington to the schools in Burnley. They couldn't cope with little budgets and employing local tradesman to do work to their big job standard, they ended up sacking loads and having to employ big companies to do small jobs at big prices.

When Labour get back in expect the Liverpool waterfront and Manchester ship canal (next to media city) to kick off big style.

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Re: Carillion in dire financial trouble.

Post by Paul Waine » Fri Jan 12, 2018 2:30 pm

evensteadiereddie wrote:The number of Cabinet/Government ministers on the board of Carillion will probably determine the size of the bailout.
Hi Eddie, without even checking we should all know that there will be no current government ministers on the board.

That's not to say that there won't be ex-gov't ministers on the Carillion board...

I'll take a look later and let you know.

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Re: Carillion in dire financial trouble.

Post by Paul Waine » Fri Jan 12, 2018 2:37 pm

Carillion Board: http://www.carillionplc.com/about-us/ou ... the-board/" onclick="window.open(this.href);return false;

Carillion Group Executive: http://www.carillionplc.com/about-us/ou ... ship-team/" onclick="window.open(this.href);return false;

No politicians that I recognise among either group - mostly building execs and similar corporate types.

Carillion was formed by the merger of a number of building/construction companies.

Their financial difficulties have been attributed to 3 contracts that have gone seriously overspent.

I'm sure several parts of the group will be saved - but, the banks that have lent them money will lose a lot of it - and shareholders will lose their investments.

Defined benefit pension scheme will transfer into Pension Protection Fund - and those future pensioners will receive, at best, 90% of what they were due to receive.

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Re: Carillion in dire financial trouble.

Post by Paul Waine » Fri Jan 12, 2018 2:44 pm

Sidney1st wrote:Plus mis-managed it's pension fund.
Hi Sid, can you name any company that hasn't got a pension deficit? Lot's of reasons for this, everyone living longer and Gordon Brown's "stealth tax" on income going into pension funds are at the top of the list.

I don't know if Carillion have an open defined benefit pension scheme - or if the deficit is just trying to manage what they had when defined benefit schemes could work well.

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Re: Carillion in dire financial trouble.

Post by Paul Waine » Fri Jan 12, 2018 2:47 pm

1fatclaret wrote:By continuing to award major construction projects to them, long after their dire financial position was made public, the government are already bailing them out. That's most definitely a strategic decision as its cheaper to bail out than see the various projects they're already engaged on stall or fail.

Any other contractor looking at their current pipeline will as a matter of course add 15 to 20 % to the price, just as a contingency.

Can't imagine many subcontractors will be sleeping too easy now, not with the 120 day payment terms they insist on. Yes, 3 months from approval of invoice you get your cash, unless you pay carillion to receive it early. Pay them for paying you, very collaborative way to work. Thank god we've got legislation in place to stop major contractors delaying payments to smaller ones.....
Agree, all the sub-contractors will be concerned about getting paid. I'm "no fan" of any company using extended settlement terms to manage their cashflow. However, it's almost inevitable if your client is the public sector. The bodies that take the longest to pay are always public sector.

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Re: Carillion in dire financial trouble.

Post by Sidney1st » Fri Jan 12, 2018 2:57 pm

Paul Waine wrote:Hi Sid, can you name any company that hasn't got a pension deficit? Lot's of reasons for this, everyone living longer and Gordon Brown's "stealth tax" on income going into pension funds are at the top of the list.

I don't know if Carillion have an open defined benefit pension scheme - or if the deficit is just trying to manage what they had when defined benefit schemes could work well.
Hi Paul.

No I can't but £600 million black hole doesn't just appear overnight, just like it didn't at BHS the other year.
Some of it appears very similar to what happened to the US Automotive industry in the mid 20th century, where they'd agreed to ridiculous pensions and early retirement ages due to a shorter average life span.
They didn't forsee people who were retiring and living longer thus draining more finances out of companies.

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Re: Carillion in dire financial trouble.

Post by Walton » Fri Jan 12, 2018 3:00 pm

What do you think about Shell's £6.9bn pension deficit Sid?

Or BP's at £6.7bn?

Tesco at £3.2bn?

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Re: Carillion in dire financial trouble.

Post by Sidney1st » Fri Jan 12, 2018 3:08 pm

http://www.telegraph.co.uk/pensions-ret ... dividends/" onclick="window.open(this.href);return false;

Your figures are out a tad in regards to (Royal Dutch) Shell....

Clearly the aforementioned companies are still dealing with their deficits and I suspect they've been doing the same as Vodafone did with my mum and encouraged her to 'retire' at 50, which she did quite happily, which helps to get reduce the amount owed to the older style pensions that are appearing to cause a lot of this issue.

BP & Shell are providing something that's still going to be needed for a long while yet.
Tescos, in theory, should also be ok, but as a side note I think they're one of those companies that require 90 days to pay their bills.

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Re: Carillion in dire financial trouble.

Post by WadingInDeeper » Fri Jan 12, 2018 3:12 pm

I'm not surprised, some of their conditions added a lot extra on to their projects.

One project required 3 permits before work could be carried out. One to obtain and check information (which they should have already had), one to consent to the next part of the project (essentially a safety check) and one to consent to the actual work. None of these could be issued on the same day, so that would have been 2 wasted site meetings (1/2 day each), which their own staff wouldn't attend, which all gets added on to the charges, all for 1 or 2 days work. If they haven't allowed for the extra, it eats into their profit, if they have allowed for it then it's wasting public funds.

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Re: Carillion in dire financial trouble.

Post by Walton » Fri Jan 12, 2018 3:26 pm

Sidney1st wrote:http://www.telegraph.co.uk/pensions-ret ... dividends/

Your figures are out a tad in regards to (Royal Dutch) Shell....

Clearly the aforementioned companies are still dealing with their deficits and I suspect they've been doing the same as Vodafone did with my mum and encouraged her to 'retire' at 50, which she did quite happily, which helps to get reduce the amount owed to the older style pensions that are appearing to cause a lot of this issue.

BP & Shell are providing something that's still going to be needed for a long while yet.
Tescos, in theory, should also be ok, but as a side note I think they're one of those companies that require 90 days to pay their bills.
£6.9bn according to Lane Clark & Peacock. I'm confident of those figures, I used to work closely with LCP and I'd trust them every day of the week.

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Re: Carillion in dire financial trouble.

Post by Sidney1st » Fri Jan 12, 2018 3:40 pm

Fair enough, you're more in the know than I am.

It's a clear sign that the pensions they were offering were not manageable and they shouldn't be allowed to run up that sort of deficit with people's pensions.

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Re: Carillion in dire financial trouble.

Post by Walton » Fri Jan 12, 2018 3:47 pm

Sidney1st wrote:Fair enough, you're more in the know than I am.

It's a clear sign that the pensions they were offering were not manageable and they shouldn't be allowed to run up that sort of deficit with people's pensions.
Sidney, to be fair I've spotted the mistake and it's the Telegraph's. The £73bn figure is the total liabilities, not the deficit. The article has picked up on the wrong figure.

As an aside and to answer Paul Waine's question about which companies don't have a deficit, I've got a list of the FTSE 100 companies with a surplus, and 25 have a surplus according to their IAS disclosures, with one firm balancing at zero.

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Re: Carillion in dire financial trouble.

Post by Sidney1st » Fri Jan 12, 2018 4:04 pm

Out of interest why are some companies able to balance or run at a surplus and others can't?

Is it to do with the size of the pension deals and contributions they have to make?

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Re: Carillion in dire financial trouble.

Post by Top Claret » Fri Jan 12, 2018 4:11 pm

1fatclaret wrote:By continuing to award major construction projects to them, long after their dire financial position was made public, the government are already bailing them out. That's most definitely a strategic decision as its cheaper to bail out than see the various projects they're already engaged on stall or fail.

Any other contractor looking at their current pipeline will as a matter of course add 15 to 20 % to the price, just as a contingency.

Can't imagine many subcontractors will be sleeping too easy now, not with the 120 day payment terms they insist on. Yes, 3 months from approval of invoice you get your cash, unless you pay carillion to receive it early. Pay them for paying you, very collaborative way to work. Thank god we've got legislation in place to stop major contractors delaying payments to smaller ones.....
Not to forget the 5%retention and any other excuse they can find to withhold payment. Subcontracting to major construction companies is a mugs game, they will screw you down to the last penny and put you on 90days plus

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Re: Carillion in dire financial trouble.

Post by Walton » Fri Jan 12, 2018 4:13 pm

Many companies took contribution holidays, so with no money going in but lots going out, there was always going to be a deficit.

Schemes are required to have a recovery plan in place, put together by the actuaries, with the employer then compelled to meet the payments.

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Re: Carillion in dire financial trouble.

Post by Paul Waine » Fri Jan 12, 2018 4:18 pm

Walton wrote:What do you think about Shell's £6.9bn pension deficit Sid?

Or BP's at £6.7bn?

Tesco at £3.2bn?
Ouch!

I've worked for both Shell and BP - and get (small) pensions from both. These deficit numbers are for both groups, respectively, worldwide pension schemes, including their very large subsids in USA. (I'm not sure whether US employers are also still liable for health care plans of ex-employees).

I'm not sure how many of Shell/BP pension schemes are still open to new recruits or how many existing staff are still accruing benefits.

UK pension schemes are required to have formal revaluations every 3 years - I think that is still the rule.

The current Interest rate curve has a big impact on valuations - as it is used to "discount" the value of future liabilities, i.e. is convert the obligation to pay pensions in the future to the monetary value at the valuation date.

But, the real impact on pension deficits is (1) longevity - which is a very good thing; (2) government rule changes, including Gordon Brown's "stealth tax" on pension fund income.

Unfortunately, it's a failure of risk management that employers are in this situation (including those that have good corporate governance).

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Re: Carillion in dire financial trouble.

Post by Paul Waine » Fri Jan 12, 2018 4:29 pm

Walton wrote:Sidney, to be fair I've spotted the mistake and it's the Telegraph's. The £73bn figure is the total liabilities, not the deficit. The article has picked up on the wrong figure.

As an aside and to answer Paul Waine's question about which companies don't have a deficit, I've got a list of the FTSE 100 companies with a surplus, and 25 have a surplus according to their IAS disclosures, with one firm balancing at zero.
Hi Walton, so, 25% in surplus - and 75% in deficit (ignoring the 1 zero balance). Can you post the list of those in surplus?

I remember the Telegraph article. Pleased I know the difference between "liabilities" and "deficit." The pension scheme included a note on the difference in the pensioners newsletter that came out soon afterwards. I heard it worried some pensioners though.

Pity the journalists who write "financial news" articles aren't always familiar with what they write about.

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Re: Carillion in dire financial trouble.

Post by Walton » Fri Jan 12, 2018 4:38 pm

Paul Waine wrote:Hi Walton, so, 25% in surplus - and 75% in deficit (ignoring the 1 zero balance). Can you post the list of those in surplus?

I remember the Telegraph article. Pleased I know the difference between "liabilities" and "deficit." The pension scheme included a note on the difference in the pensioners newsletter that came out soon afterwards. I heard it worried some pensioners though.

Pity the journalists who write "financial news" articles aren't always familiar with what they write about.
Fingers crossed this works:
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Re: Carillion in dire financial trouble.

Post by Walton » Fri Jan 12, 2018 4:39 pm

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Re: Carillion in dire financial trouble.

Post by Walton » Fri Jan 12, 2018 4:41 pm

It might work better if you open each image in a new tab

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Re: Carillion in dire financial trouble.

Post by Paul Waine » Fri Jan 12, 2018 5:15 pm

Walton wrote:It might work better if you open each image in a new tab
Thanks, Walton. I used my phone camera to magnify the images - just about worked.

I also found the report on LCP's website - but needed to sign-up to download the report - so, didn't proceed.

I was surprised by the Royal Mail surplus - but then took a look at their accounts - where they announce the closure of the pension scheme, May-2018 - as otherwise it would run into deficit in the coming year and beyond.

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Re: Carillion in dire financial trouble.

Post by Sidney1st » Mon Jan 15, 2018 12:54 am

Its possible the government are going to let them disappear.

However I didn't realise that apparently if a business issues a profit warning the Government is supposed to list them as high risk and not award them new contracts.

Could be some repercussions for numerous people in high places at this rate.

ClaretDiver
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Re: Carillion in dire financial trouble.

Post by ClaretDiver » Mon Jan 15, 2018 6:58 am

Seems they have gone into liquidation......

gawthorpe_view
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Re: Carillion in dire financial trouble.

Post by gawthorpe_view » Mon Jan 15, 2018 8:02 am

Compulsory liquidation is now confirmed.

Dy1geo
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Re: Carillion in dire financial trouble.

Post by Dy1geo » Mon Jan 15, 2018 8:31 am

It is true that the Pension Fund deficit and the servicing of that deficit is a major factor is the company liquidating.
People can say it’s down to Pension Fund mismanagement which is in part true but schemes are faced with having to provide statutory revaluations of both Pensions in payment and those not in payment.
To put this in perspective these are figures of a member who joined a scheme on 01/03/1991 and left 04/09/1992 (only 1 and half year membership), Pension upon leaving £1,363 (member contributions £751), through statutory revaluation this has risen to £5448 now, the member is still a few years off the scheme retirement age so it still has to be revalued annually. When the member decides to retire the scheme has to increase the payments annually. Now the member has been offered a transfer value of £192,638 (Not bad for a contribution of £751).
These are liabilities that are “killing schemes” a poster above correctly points to the Pension Protection Fund but this is funded by a levy on schemes so schemes like Carillion will have been trying to alleviate their deficit whilst at the same time be hit with a PPF levy
The PPF whilst not being perfect is only viable if it receives PPF levy contributions

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Re: Carillion in dire financial trouble.

Post by CrosspoolClarets » Mon Jan 15, 2018 8:44 am

This will distract a lot of public sector organisations including a lot of hospitals who have major issues to deal with currently.

Much work will currently be carried out by subcontractors who will be facing uncertainty, and realistically much of the work will stall. There will be major knock on effects from this that will affect people’s lives, not just the workers.

I would be a little concerned that this type of thing could lead to contagion across the sector, depending on the degree to which other firms also have schemes that have fallen behind, and cash flow difficulties. I would also think people will be keeping a close eye on the top managers and will be looking to see if any come out of this smelling of roses (which seems inevitable). I can certainly see Corbyn making capital out of this, whether that is right or wrong.

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