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When Carillion collapsed under the sheer weight of its pension deficit, the government was quick to provide reassurance that they would minimise the knock-on effect within the private sector. After all, the firm employed an estimated 19,500 staff members at the time of its demise, while it was also engaged in a number of lucrative private construction projects with significant relevance to infrastructure.
One of the most prominent was the construction of the HS2 (high-speed 2) rail network, which commenced last year and will ultimately connect a number of major British cities in the north and the south.
With this in mind, it’s worth asking whether Carillion’s collapse will have a direct impact on the HS2, and how any subsequent issues may be resolved?
Carillion and the HS2 – Will the Project Remain on Course?
For those of you who don’t know, the HS2 is part of a vast and ongoing infrastructure project that has been designed to provide greater connectivity between major cities in the UK and Europe. The initial part of the project, the HS1, was completed in 2007, and provided a high-speed rail connection between London and the UK end of the Channel Tunnel.
With HS2, developers have planned to extend the number of high-speed railway routes in the UK, creating a new infrastructure that will serve as the backbone of public transport in the future. More specifically, the HS2 will connect London, Birmingham, the East Midlands, Leeds and Manchester, creating a “Y” configuration that spans from the north to the south of the country. While this project is still its infancy after years of careful planning, it is hoped that the initial services will be offered at some point in 2026.
Last summer, the government awarded a total of $6.6 billion in contracts to complete construction of the HS2, with Carillion one of the biggest beneficiaries of the project. This came at the ideal time for the beleaguered construction firm, which had recently seen its share price fall by 70% following a profit warning the departure of its chief executive. Once it was announced that Carillion was to play a pivotal role in the HS2 project, however, the firm saw its shares increase by 19% and a potential crisis seemed to have been averted.
While it was assumed that the announcement would help Carillion to rebuild and add up to 16,000 jobs, the company was simply unable to extradite itself from extradite itself from a spiralling pensions crisis that created an insurmountable deficit. This led to its disbandment in January, whilst triggering widespread concerns that the HS2 project could be delayed as new tenders were proposed and any potential contractual disputes were resolved.
The Bottom Line – Is There a Contingency for the Collapse of Carillion?
Despite the obvious concerns surrounding the collapse of Carillion, there is genuine optimism that the HS2 project will be spared from any adverse effects. Firstly, the Conservatives have already stated confidently that the contracts for building the HS2 will remain in the private sector, minimising delays and negating the need for new bids.
Similarly, Carillion’s former construction partners Kier and Eiffage have assured ministers that they have a contingency plan to cope with the recent events, enabling them to take on additional workload and complete the complex London to Birmingham section of the HS2 line by themselves. Part of this plan may include employing former Carillion staff to work on the project, although spokespeople for both firms have claimed that there are number of options to ensure that the build is completed on time.
Legal firms including DWF Law are also well-placed to assist with any potential contractual disputes, including those pertaining to the redistribution of funds should Kier and Eiffage collaborate to take on Carillion’s share of the workload.
With these points in mind, there’s every reason to believe that the project will continue unabated, ensuring that Carillion’s untimely collapse will not undermine one of the UK’s biggest infrastructure projects in living memory.