The collapse of construction giant Carillion has thrown the future of a major new West Midlands hospital into doubt.
Carillion was building the Midland Metropolitan Hospital, a 669-bed hospital in Smethwick, the Black Country, which will substantially replace emergency services currently provided at City Hospital in Birmingham and Sandwell Hospital.
NHS managers have begun talks with the Treasury to try to ensure the £558 million hospital can open as planned in 2019.
Toby Lewis, chief executive of Sandwell and West Birmingham Hospitals Trust, said: “We regret this morning’s announcement concerning Carillion, who are the constructor for our long awaited new hospital, which is almost complete.
“We are working closely with HM Treasury and The Hospital Company as alternative arrangements are put in place to ensure that the construction of the Midland Metropolitan Hospital is completed. People working for Carillion are part of our local community and we will want to do anything that we can do to support their needs and futures at this difficult time.”
The state-of-the-art hospital is to have 13 operating theatre suites.
Birmingham City Council officials are looking into contracts the authority has with Carillion to see how the city might be affected.
Carillion built Birmingham’s stunning new central library, the Library of Birmingham, which opened in 2013.
The firm employs 400 people at its headquarters in Wolverhampton, and their jobs are now under threat.
It is also a partner in contracts to work on the HS2 high speed rail line due to link London and Birmingham, and provides school dinners on behalf of some local authorities. Carillion also provides 50,000 homes for service personnel across the country on behalf of the Ministry of Defence.
The firm has a training centre for construction apprentices in Tyburn road, Erdington.
Birmingham MP Jack Dromey (Lab Erdington) said: “Carillion was involved with projects all over the Midlands.
“It was reckless management on the one hand that led to this but also, the government stood back and let it happen.
“We need to protect jobs and also the pensions of Carillion staff, some of whom have worked for the business for decades.
“The apprenticeship centre in my constituency is a world-class facility and one priority for me will be ensuring it survives.”
Carillion said it has “no choice but to take steps to enter into compulsory liquidation with immediate effect” after talks failed to find another way to deal with the company’s debts.
The stricken firm, which employs 20,000 workers across Britain, said crunch talks over the weekend aimed at driving down debt and shoring up its balance sheet had failed to result in the “short-term financial support” it needed to continue trading while a deal was reached.
Carillion, which has been struggling under £900 million of debt and a £590 million pension deficit, has seen its shares price plunge more than 70% in the past six months after making a string of profit warnings and breaching its financial covenants.
Its collapse poses questions as to why the group continued to receive Government contracts despite issuing a number of profit warnings.
The Government has urged staff to keep going to work and said “those already receiving their pensions will continue to receive payment”.
Britain’s second biggest construction firm is understood to have public sector or public/private partnership contracts worth £1.7 billion, 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.
Cabinet Office Minister David Lidington said: “It is regrettable that Carillion has not been able to find suitable financing options with its lenders but taxpayers cannot be expected to bail out a private sector company.”
Unions have called for urgent reassurances over the jobs, pay and pensions of thousands of workers following the “disastrous” news.
Jim Kennedy, the Unite union’s national officer for local government, said a public inquiry was needed to answer questions about Carillion’s conduct and the Government’s decision to award it contracts.