The government must “come clean” on deals it signed to support Carillion projects overseas and prove the schemes played no part in its collapse, Labour’s international trade spokesman has told Construction News.
Shadow international trade minister Barry Gardiner said the government needed to provide details over the structuring of finance deals on Carillion schemes and prove they did not expose British taxpayers to any unnecessary risks.
“Carillion’s bosses claimed they have spent some 60 per cent of their time chasing payment from overseas customers,” he said, referring to Carillion’s former leaders appearing before a joint select committee on Tuesday.
“We know that some of these customers have been leant money directly by UK Export Finance (UKEF) to support Carillion’s contracts.
“The government must come clean as to whether deals underwritten by UKEF have played any part in the collapse of the construction giant.
“Did the structuring of this finance expose British taxpayers to unnecessary risks and what steps are they taking to protect taxpayers’ money.”
In early July, UKEF, the government’s overseas credit agency, announced it had provided $180m (£129m) of finance for the Dubai World Trade Centre project on the basis that the client hired Carillion for the third phase of the multi-billion-pound scheme.
The announcement came just days before Carillion issued its first profit warning and a massive contract provision on one of its Middle East schemes.
A freedom of information request made by Construction News revealed that the form of this loan was “direct lending”, meaning the government loaned the money to Dubai World Trade Centre when it appointed Carillion on the scheme.
Carillion signed the phase three deal in the early part of last year and began work soon after. The contract was reported locally as being worth Dh725m (£140m).
Under the terms of the UKEF’s deal, the client would begin loan repayments when the project was completed.
The FoI request by CN revealed the loan payments could potentially rise to $241m after interest.
When asked by CN whether it was responsible for finding a new contractor on the project, UKEF said it was working with stakeholders to find “appropriate solutions” for Carillion’s unfinished Dubai project, but it would not provide any further details on specific contracts.
A spokeswoman for UKEF stressed the government’s exposure on the Dubai project was to its client rather than Carillion.
The project marked the third time the government had provided funds to assist Carillion in winning work in the Middle East.
The firm also secured a second loan from UKEF in 2016 to support Carillion’s work on phase two of the Dubai World Trade Centre.
The government said that on these projects construction had been completed and the finance was now being paid by the overseas buyer and would continue.
The extent of Carillion’s problems in the Middle East were revealed by former chief executive Richard Howson in front of MPs on Tuesday.
The former boss told the committee he “felt like a bailiff” when trying to collect £200m it was allegedly owed on the Mesheireb development in neighbouring Qatar.
He also revealed that by March 2017 the firm was aware of delays to the scheme, due to the contractor not being paid for the work it had carried out.
Msheireb Properties rejected Mr Howson’s claims, alleging that it was in fact Carillion that was unable to pay its suppliers.