Cost of Carillion collapse for Oxfordshire County Council ‘very significant’

Construction giant Carillion the firm carrying out the major upgrade of Market Harborough railway station enters compulsory liquidation.'PICTURE: ANDREW CARPENTER
Construction giant Carillion the firm carrying out the major upgrade of Market Harborough railway station enters compulsory liquidation.'PICTURE: ANDREW CARPENTER

The cost of dealing with the collapse of construction firm Carillion for Oxfordshire County Council is expected to be ‘very significant’ as councillors get set to consider the impact.

The county council is carrying out a detailed review of the costs and liabilities related to its properties following Carillion going bust so a robust financial plan can be considered by councillors in the autumn and included in the council’s budget.

A senior officer apologised for the disruption and uncertainty caused by the fact the total cost of Carillion’s collapse is not known and called on all affected organisations to work together.

Members of a committee will consider the process of assessing costs, liabilities and risks to assure themselves that the review of the county council’s properties is thorough and comprehensive next week.

Audit and governance committee chairman Cllr Nick Carter said: “Like many other public bodies, Oxfordshire is having to pick up the pieces left after the collapse of Carillion.

“We need to know the real costs of getting our properties in good order so the council can plan and budget properly.

“To minimise the impact to Oxfordshire tax papers, it is vitally important that no stone is left unturned when reviewing the potential costs and liabilities.

“Councillors on the audit committee will want to satisfy themselves that there is a proper process in place, with health and safety made the number one priority.”

Carillion provided services on behalf of the county council including maintenance of council buildings; property services, and building work such as school extensions.

The firm left debts of almost £7m after being put into liquidation in January and the council paid £10.6m to cover work already completed as part of the agreement to end its contract with the company.

The costs of dealing with ongoing construction and property maintenance problems following Carillion’s collapse have not yet been calculated.

Surveys to assess defects in buildings including schools are continuing across the county council’s properties.

Compliance with health and safety requirements is also being considered, with any safety issues that emerge being dealt with quickly, a council spokesman said.

One of the problems that came to light after Carillion collapsed was that records of building assessments were not kept properly – this means that building maintenance requirements are emerging for the first time.

Where possible, unfinished work by Carillion as the council’s property maintenance and building contractor has restarted, with new contractors in place.

The hardest cost to quantify are ‘latent defects’ – problems that emerge after building work is completed that would normally be dealt with as part of the contract with the builder.

With some – but not all - Carillion businesses in liquidation, claiming for the cost of these defects is not straightforward, and may lead to legal action.

The county council is surveying the structural condition of buildings and does not include the general condition of buildings, including schools, which schools manage themselves through their delegated budget.

The council’s director of capital investment and delivery, Alexandra Bailey, said: “The collapse of Carillion has created financial and legal difficulties related to our properties, which we are working through in detail.

“We don’t yet know what the total cost will be but I do know it will be very significant.

“I know this uncertainty is having an impact on service users and staff who use our buildings and I am sorry about the disruption and uncertainty this has caused.

“We have no choice but to go through each issue systematically and come up with a long-term recovery plan.

“Where we can get building work moving again we have, and our first priority is always to deal with health and safety issues.”

Many councils and other public service organisations were hit by the collapse of the Carillion, and the county council believes those organisations need to band together to deal with the government and the company’s liquidators.

The county council is now gathering support for a national stakeholder event in October organised jointly with the Local Government Association to consider opportunities for joint action to minimise the costs to local council tax papers.

Ms Bailey said: “This is a national issue and we would like to see a national response to ensure that the public sector does not bear the brunt of this corporate failure.

“The cost is likely to be significant, but the county council’s financial position is resilient and we can manage the impact on our budget over the long term.

“We are doing everything we can to minimise the costs and taking a robust legal position with the liquidators to ensure that local tax payers do not bear an unfair burden following Carillion’s collapse.”

The audit and governance committee will discuss the impact of the collapse of Carillion on July 25.

The council’s cabinet is expected to receive an assessment of the costs in the autumn, along with a long-term plan for dealing with the problems identified in surveys.