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Carillion’s ‘liquidation’ is extremely rare

David Birne, insolvency partner at HW Fisher & Company, comments on the collapse of Carillion…

For a company Carillion’s size, it is extremely rare to opt for a liquidation rather than an administration – and a compulsory liquidation at that.

It suggests there is little, if anything, of value within the company to be saved. Almost every big insolvency in recent years has been a move towards administration rather than liquidation.

For Carillion’s 43,000 global staff, liquidation means the immediate risk of redundancy.

For Carillion it will mean huge breach of contract penalties that could dwarf anything demanded of it by creditors.

And there will undoubtedly be a knock-on effect for companies that supply Carillion that will go all the way down the supply chain to the smallest firms.

It is almost certain the Pension Protection Fund (PPF) is going to have to step in to deal with the GBP800 million pension deficit, which will be damaging to the pensions of Carillion’s current and former employees.

But it will also hurt the pensions funds of those not connected to Carillion because the PPF will be forced to increase charges to cover taking over such a huge deficit.

The fact Carillion has opted for a compulsory liquidation suggests the directors of the company may have sought to expedite the process rather than leave their workforce in limbo – and unpaid – for six weeks.

In this way, at least some of its employees can be moved over to other contractors, particularly where they are working on government contracts, such as HS2 and Crossrail, but there could still be many thousands of workers left looking for a job only three weeks into the new year.

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