FTSE dips as investors weigh Carillion hit to United Kingdom economy

London skyline at dawn ahead of the market's opening

Given the size of Carillion, the UK's second-biggest construction company, with 43,000 employees and contracts on a wide range of projects, including a number of flagship infrastructure projects, this will inevitably have a significant impact on the United Kingdom construction sector as a whole.

Its shares price has plunged more than 70% in the past six months after a string of profit warnings and breached its financial rules.

Meanwhile in Smethwick a skeleton crew of workers was manning another major Carillion building project - the £350 million Midland Metropolitan Hospital.

"The knock in confidence to the United Kingdom economy - Carillion employs around 20,000 people, and utilizes a huge network of smaller subcontractors - likely contributed to the FTSE's. dip", on Monday, said Spreadex financial analyst Connor Campbell in a note.

Leeds City Council said it had implement contingency plans for building the East Leeds Orbital Road, where Carillion's contract was not finalised, and was working Carillion's administrators over the £4m city centre cycle superhighway, which was only 20% complete.

He told the ECHO: "The board is of course concerned about the stability of Carillion".

"Much of the morning has seen Carillion's peers and partners let investors know whether or not they will be hurt by the company's liquidation".

Despite this, construction at Midland Metropolitan has been a concern because the trust will now have to find a different company to finalise the project.

'As such, we are hopeful that the project can continue with minimal impact'. They also have access to insurance funds to enable it to complete the project.

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"Carillion now provide facilities management services including maintenance and repairs to the estate". Carillion shares, which trade off the FTSE 100, have been halted.

"This will involve either transferring the staff to a newly-contracted company or to our own internal staff agency, as an interim measure to ensure work can continue and staff can continue to be paid".

The company also helped build the Oakville-Trafalgar Memorial hospital and now holds a contract for facility management.

The Brampton Civic Hospital P3 privatization scheme was found to have cost $394.4 million, or 64 per cent, more than originally budgeted.

It said it had undertaken work for Carillion in December and had requested payment but had yet to receive money for the work.

Louise Ellman, Labour MP for Liverpool Riverside, said she was disappointed by the delays and "extremely concerned" by Carillion's financial position, vowing to keep pressing the firm for a completion date for the hospital.

Direct consequences of the collapse for Carillion JVs have already emerged, however.

"Carillion is a victim of the industry's business model - a model that doesn't work". It is too early to predict the outcome of these discussions but Carillion expects that any such agreement is likely to involve the raising of new capital and the conversion of existing financial indebtedness to equity which would result in significant dilution to existing shareholders.

Transportation Minister Steven Del Duca said his officials met with Canadian representatives of the company and services will continue for now.

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