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What Damage Could Carillion's Crash Do To The Midlands?

Today's appointment of PwC as liquidators for Wolverhampton-based contractor Carillion is more than just an issue for the government who put so much faith in private sector partnerships with the firm.

The implications of the liquidation — and the likely outcomes — could also mean headaches across the Midlands property market.

These are the issues to watch.

1. Transport projects off the rails?

Carillion Rail division railway

In July Carillion was one of 11 contractors awarded work on the £6.6B HS2 first phase London-Birmingham line.

Carillion's share of the contract was estimated to be £450M as part of a consortium including Keir and French-based contractor Eiffage. The contracts — part of a batch related to bridges and tunnels — would have seen Carillion involved in boring tunnels under the Chiltern Hills to the north-west of London.

Given the relatively small size of this contract — and the wide range of contractors involved in the August signing — the risks to HS2 will be small.

It is hard to assess the risks to the other major Carillion transport contract in the Midlands. The Midlands Mainline Electrification has had a troubled on-off history which appeared to have ended in the on-position with the appointment of contractors in November.

Electrifying the London to Corby section in a joint venture with Powerlines was expected to generate £62M of revenue for Carillion.

2. Paradise Regained

Hermes' Paradise development, Birmingham
The Paradise Scheme, Birmingham

It is barely 18 months since Carillion was announced as contractor at 172K SF One Chamberlain Square, part of Hermes Investment Management's Paradise development, Birmingham.

Hermes and their development managers Argent will, however, be insulated from the worst of the Carillion fall out at the £700M Paradise development in Central Birmingham.

First, for the obvious reason that One Chamberlain Square topped out before the new year and, ironically, is now fully let to Carillion's liquidator, PwC.

Hermes will be feeling even safer thanks to a pivot away from Carillion late last summer.

In August they announced a change to the contracting team for the second phase of the Paradise project. The long-term framework arrangement with contractors BAM, Carillion and Kier was replaced by Laing O’Rourke, McLaren, Sisk, Midgard and Rydon.

Questions will also be raised about the future of the firm's 42K SF HQ at the former Staffordshire Building Society offices, Salop Street, Wolverhampton. Carillion moved into the block as recently as 2015. Up to 600 staff are employed at the office. Carillion's roots in the town go back to its foundation in 1999 after a de-merger from Tarmac.