Agenda item

Council received the Chairmans announcemnet.

There were no petitions.

County Councillor P. Murphy issued a statement regarding the recent insolvency of Carillion Plc:

Council will be aware as a result of the extensive press coverage this week that Carillion Plc entered into insolvency along with several of its subsidiary companies in the group. We understand all companies will continue to operate, providing continuity of public services until further notice.  However it is less clear at this stage how this will impact on the company’s supply chain and the wider ramifications for the wider private and public sector in the UK.

Monmouthshire County Council is unaffected directly at this stage by the announcement but recognises that the announcement has wide-reaching implications for the public sector.  Most public services have been largely unaffected so far, as services were often subcontracted to smaller suppliers or in some cases held in partnership with other large contractors.  We sympathise with those public sector organisations that have been or will be affected by Carillion’s insolvency. The County Council does not hold any contracts with Carillion Plc or any of its subsidiaries.  We also have no future schemes planned with them.

We appreciate the private sector will be feeling the impact as well, and it’s a difficult time across the board. Over the coming weeks and months we expect there will be more clarity on what this announcement means in reality as the impact on the supply chain is better understood.  The Authority is continuing to access its wider networks to obtain further insight and information.  Welsh Government are working closely with the Cabinet Office to assess Carillion’s coverage across the public sector.  The National Procurement Service are undertaking research to better understand supply chain impacts.  However, available information is both limited and speculative at the moment.

The Authority welcomes early dialogue with companies in Carillion’s supply chain who are adversely affected and who may have difficulty honouring any current or future commitments to the Authority.

The press speculation this week has also focused on Interserve Plc, who’s subsidiary Interserve Construction Limited are contracted to build Monmouth and Caldicot comprehensive schools.  Interserve Plc reported additional costs to its investors last September as a result of it quitting the energy-for-waste sector which consequently led to a slump in its share price after warning that it would breach bank loan covenants.  This saw the company issuing profit warnings.  The banks have subsequently reorganised the company’s debts and the company has also since announced the awards of significant contracts.  The company’s balance sheet has since improved. 

The Authority has a parent company guarantee with Interserve Plc in place for the two school builds.  The Authority has also had reassurances from Interserve’s Directors that all is good and that the company has the right strategic plan in place to move forward.

We watch the press on a regular basis to observe market information and activity.  We monitor valuations, the programme of work and listen to sub-contractors around payment and getting paid and signs of the construction programme slipping.  None of this has been evident to date and officers advise of no current concerns.

Whilst there always remains a risk this is seen as minimal now to the whole project.  Caldicot School is in defect period and the Authority has enough retention to cover liabilities if Interserve walked away.  Monmouth is less advanced as we know.  We have just under 7 months on site left, the main frame is complete, the building is nearly watertight so it will shortly become a fit out project in a couple of months and at which point and upon any failure by Interserve to honour the contract could be taken on by others.

The Cabinet Office issued a statement this week to highlight that the situation with Carillion and Interserve are not comparable and resulting from speculation that it was monitoring Interserve.  It said “We monitor the financial health of all of our strategic suppliers, including Interserve. We are in regular discussions with all these companies regarding their financial position. We do not believe that any of our strategic suppliers are in a comparable position to Carillion.”

Interserve itself also looked to reassure the market in response to reports that the Cabinet Office was monitoring the company.

It said: "Last week we announced that we expect our 2017 performance to be in-line with expectations outlined in October and that our transformation plan is expected to deliver £40m-£50m benefit by 2020.  This remains the case and we expect our 2018 operating profit to be ahead of current market expectations and we continue to have constructive discussions with lenders over longer-term funding."      

The Authority is continuing to actively monitor the situation, both in respect of the fallout from Carillion’s insolvency and Interserve’s ongoing financial standing.

County Councillor Howarth requested that the Leader write to the Minister to ask what safequards he can provide regarding the project from Brynmawr to Tredegar, as Carillion were the contractor for that section of carriageway, and is now a concern for residents of Llanelly Hill ward.