Royal Bank undermined Carillion rescue efforts, claims defunct firm’s interim boss

The huge construction firm went into liquidation earlier this week after collapsing under a mountain of debt.

A last-ditch plea from Carillion to the government to provide it with a £20 million lifeline fell on deaf ears over the weekend, triggering a compulsory liquidation.

Carillion has public sector or public/private partnership contracts worth £1.7 billion, including providing school dinners, cleaning and catering at NHS hospitals, construction work on rail projects such as HS2 and maintaining 50,000 army base homes for the Ministry of Defence.

But it had seen its shares price plunge more than 70 per cent in the past six months after issuing a string of profit warnings and breaching its financial covenants.

The group, which employs around 20,000 British workers, had been struggling under £900 million of debt and a £587 million pension deficit.

Yesterday, in the wake of the firm’s demise, Keith Cochrane, Carillion’s interim chief executive, accused still 73 per cent state-owned RBS of taking “unilateral action which in the company’s view undermined the group’s efforts to conserve cash”. According to a witness statement, he said the Edinburgh-based bank restricted funding three days before Carillion went under.

The details are included in a document Mr Cochrane has prepared as part of the insolvency process.

His statement sets out attempts to save Britain’s second-biggest construction company after three profits warnings and a collapse in the share price.

Efforts to sell off parts of the business failed and Carillion’s banks became more demanding, only agreeing fresh funding under tight new conditions that the company was unable to meet, the statement discloses.

There had been regular meetings with the government and its advisers in the final few months of 2017, Mr Cochrane says. But on 31 December a “formal request” was made for support from the government.

But RBS responded to the attack saying that it had “provided considerable support and forbearance to Carillion over many months”, arguing the “restructuring plan put forward by the company was not viable”.

Mr Cochrane’s criticism of RBS comes as it emerged that top bosses at the firm are to be investigated after the construction firm’s collapse put thousands of jobs at risk and saw the government heavily criticised for its role in the debacle.

David Lidington, the Cabinet Office minister, told parliament yesterday afternoon that the Official Receiver will now investigate the role of the company’s directors in its collapse, warning they could face “severe penalties”.

Anger has risen at news of bumper payouts received by the firm’s former chief executive Richard Howson who pocketed £1.5million in salary, bonuses and pension payments during 2016 and, as part of his departure deal, Carillion agreed to pay him a £660,000 salary and £28,000 in benefits until October.

Meanwhile, the Scottish Government has set up helplines for anyone who may be affected by the failure of the construction firm.

Scottish companies affected by the Carillion insolvency can call Scottish Enterprise on 0300 013 3385 or register their details here

The redundancy helpline operated by Skills Development Scotland is 0800 917 8000, with help also available here.

It was also announced today that banks and government were working together to mitigate the effects of Carillion’s collapse on businesses within the supply chain.

Stephen Pegge, UK Finance managing director, Commercial Finance, said: “UK banks and the Government are working closely to make sure the impact of the Carillion liquidation on SMEs in the supply chain is understood and managed in a way that best supports those in need of assistance. Lenders are contacting customers and, where appropriate, are putting in place emergency measures, including overdraft extensions, payment holidays and fee waivers to ensure those facing short term issues can be helped to stay on track.”

Scotland’s economy secretary, Keith Brown, said: “We recognise this is a very worrying time for employees and companies who will be concerned for their jobs and livelihoods.

“We have set up these support lines to ensure people can get the advice they need and so we can understand the extent of this situation as we know this will affect the wider supply chain.”

Carillion formed one third of the Aberdeen Roads Ltd (ARL) consortium, alongside Balfour Beatty and Galliford Try, which is delivering the £745m Aberdeen Western Peripheral Route (AWPR).

Mr Brown also again emphasised that there is “nothing in the nature of the Carillion announcement that necessitates a delay” in the project.

But he said the government would “keep our eye on further developments as they take place”.

Mr Brown told the Scottish Parliament: “We understand that Balfour Beatty and Galliford Try will now take the necessary steps to jointly deliver the remainder of this project.

“We will look to see if there are any additional costs - we don’t expect there to be any but of course we are having dialogue with the companies involved.”