Bank of England plays down risk to Carillion's lenders

Bank of England plays down risk to Carillion’s lenders

Lenders to collapsed construction and infrastructure group Carillion are not under direct threat, according to the Bank of England.

But the bank warned the ripple effects from the company going into liquidation were yet to be fully felt.

Treasury Select Committee chairman and Conservative MP Nicky Morgan questioned a panel of Bank of England representatives about the impact on financial services, following reports that some lenders could face hefty losses due to billions of pounds worth of exposure on its loans and debt.

Sam Woods, the bank’s deputy governor for prudential regulation and head of the Prudential Regulation Authority, assured that he had checked the exposure data for banks and insurers but found little reason to be concerned.

He told MPs: “Those direct exposures are entirely manageable across all the institutions.

However, the secondary effects are not as easily measured.

“There’s then the question of will there be a wider, indirect issue with suppliers and that’s more difficult for us to get a handle on (but) I’m not massively worried about it.”

Wolverhampton-based Carillion was placed into liquidation yesterday after struggling with debts of £900 million and a pension deficit of £590 million.

The company holds hundreds of public sector contracts with bodies such as the NHS and Ministry of Defence and is working on phase one of the £700 million Paradise development in Birmingham city centre, HS2 and the new Midland Metropolitan Hospital in Smethwick.

It employs around 400 staff at its head office in Wolverhampton and 20,000 across the UK but those on private sector contracts will not be paid after tomorrow unless other companies come into take over the contracts.

Staff on public sector contracts will continue to get paid, the Government has said.

These latest comments from the Bank of England come amid reports that Carillion’s lenders, including Barclays, HSBC, Royal Bank of Scotland, Lloyds and Santander UK, are facing heavy losses on their £2 billion exposure.

There are also issues surrounding the hole left by Carillion on the services front, with the collapsed company having been contracted to manage a number of company buildings and facilities, including their security.

Elsewhere, Shadow chancellor John McDonnell has accused the Government of being “too close” to Carillion.

Mr McDonnell alleged ministers were “too wedded” to privatisation and as a result had handed contracts to Carillion to try to “buoy up” the failing company.

Chief Secretary to the Treasury Liz Truss rebuffed his comments and accused Mr McDonnell of taking “cheap political shots”.

Speaking during Treasury questions, Mr McDonnell said: “When there were loud and clear worrying signs about Carillion, why, instead of intervening, did the Treasury Minister collude in the strategy of drip-feeding more contracts to Carillion to buoy up an obviously failing company?”

Ms Truss said: “It would be completely wrong for a company that had got itself in this state to be bailed out by the state and that is what we are not doing.

“We’re making sure we continue to supply those services at the same time as helping people who are working for those companies.”

Latest Tweets

    Please check your internet connection.