Counting the cost of Carillion collapse in Leeds

Leeds City Council says it is “very concerned” for the future of all those affected by Monday’s announcement that a compulsory liquidation had been triggered, while small independent businesses who expected to cash in on new developments say they face an uncertain future.

The council says it has been reviewing how the news will affect the city, and what can be done to reduce the impact on people in the city as well as the authority-driven projects that are in the pipeline.

The headline scheme is the East Leeds Orbital Road, for which Carillion was the successful tenderer. However, a council statement said the final contract had not been awarded and the authority is now looking at options to secure an alternative contractor or re-tendering.

Tom Riordan, the council’s chief executive, said: “While Carillion were the preferred bidder for the ELOR work, a final contract had not been signed off. The contingency plans in place reflect the fact that we have been monitoring Carillion’s situation and planning accordingly.”

The council has only one current contract with Carillion, which is the construction of the £4m City Centre Cycle Superhighway.

Less than a quarter of the work on site has been completed, in line with the intended programme. In light of Monday’s announcement, the council says it is liaising with the staff and the administrator to make sure the impact of Carillion’s situation is managed with minimum disruption. Works in and around the city centre are being looked at with key sub-contractors and suppliers (such as traffic management and fencing contractors) to ensure continuity and the highways and transportation department’s direct labour organisation - a unit comprising workers employed directly by the authority - will also be used when necessary.

Carillion is also contracted to provide services, such as catering and cleaning, at Lawnswood High School, Roundhay High School, Oakwood Primary Academy, Hilltop Primary Academy, Five Lanes Primary School, Asquith Primary School and Spring Bank Primary School under the Leeds 7 Schools PFI deal done back in 2001.

Given concerns over Carillion, the council and the Education Support Company (ESCo), also involved in the contract, prepared contingency plans to ensure essential school services are maintained and that Carillion staff were able to work as normally as possible.

Mr Riordan added that the city council was eager to see what plans the Government had to help those affected by the Carillion collapse.

He said: “We also know this will affect many people who work for Carillion directly and indirectly, and we will want to see how government can make sure any arrangements take account of the impact on them of what has happened.”

One of those could be cafe owner, Martin Dunderdale, whose business plan had been based around planned Carillion developments in the city.

David Street Cafe has been going for 26 years in Holbeck and its relocation to Water Lane had been largely influenced by proposals for a commercial, retail and residential development at Tower Works.

Carillion had been appointed the contractor to deliver the scheme by the government’s then Homes and Communities Agency (which changed to Homes England this month) and was expected to bring hundreds of contractors to the area - providing a knock-on boost for local businesses.

Mr Dunderdale said: "Our business plan going forward was the redevelopment of this area. We are not in jeopardy but do work in terms of a five year plan and what’s going to happen over the next five years but that has been on hold for quite some time now.

“Our breakfast trade is largely construction and when they were building Bridgewater Place people were queuing for seats. These kind of projects make a big difference to a business like ours.

“We anticipated another wave but since 2008 most of it has come to a halt. The whole construction industry seems to be holding its breath and from Leeds’ point of view these things have an impact but we want the city to move ahead.”

Carillion has public sector or public/private partnership contracts worth £1.7bn, 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 has 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 rules.The group, which employs around 20,000 British workers, has been struggling under £900m of debt and a £587m pension deficit.