Why Liverpool is STILL counting the cost of Carillion failure

Standing next to Liverpool’s flagship hospital, a £1.1billion replacement lies unfinished even as the city battles the pandemic.

The new Royal Liverpool was meant to be opened in 2017 – but the 13-storey building is five years behind schedule.

It has been branded a ‘monument to greed’ and is a towering reminder of construction giant Carillion’s collapse, which left the project rudderless and forced the city to wait again for its long-overdue hospital.

The Royal Liverpool Hospital in 2020

The Royal Liverpool Hospital in 2020

An artist's impression of the Royal Liverpool Hospital. It was meant to be opened in 2017

An artist's impression of the Royal Liverpool Hospital. It was meant to be opened in 2017

Slow progress: The Royal Liverpool Hospital, now a construction site, left, and as it will look, right, was meant to be opened in 2017 – but the building is five years behind schedule

Carillion’s fall was thrust back into the spotlight this month when the City watchdog revealed plans to take enforcement action against its former bosses, with fines, bans from corporate roles and other penalties as possible options.

The Financial Conduct Authority said directors, who it did not name, presided over a string of ‘reckless’ statements that gave investors a ‘misleadingly positive’ picture of its finances, even as it struggled to stay afloat in 2017. 

Over five years, they also borrowed money and sold assets to help fund £376million worth of payouts to investors.

Carillion failed in January 2018, owing an astonishing £7billion, making it one of Britain’s biggest-ever corporate catastrophes.

It put 20,000 jobs at risk and plunged projects such as the Royal Liverpool, already plagued by building issues, further into chaos.

Critics have attacked not just Carillion and its directors, but also auditors at KPMG, its book-keeper, for failing to spot warning signs.

In Liverpool’s case, the city is battling a pandemic with a hospital in dire need of replacing. 

The new Royal Liverpool’s facilities, including top-of-the-range medical equipment and separate rooms for every patient to help stop infections spreading, would have been a big help in combating Covid-19.

But the project is unfinished and not ex-pected to fully open until 2022. This means local patients have been sent instead to the crumbling Royal Liverpool Hospital, while its replacement sits almost empty nearby.

Lord Prem Sikka, a professor of accounting at the University of Sheffield, said the project was a grim example of corporate disasters.

Lord Prem Sikka, a professor of accounting at the University of Sheffield, said the project was a grim example of corporate disasters.

Lord Prem Sikka, a professor of accounting at the University of Sheffield, said the project was a grim example of corporate disasters.

Just three of its 23 wards have been opened, with doctors at the existing hospital, opened in 1978, warning they are being ‘overwhelmed’ by rising numbers of patients with Covid-19.

Dan Carden, Labour MP for Liverpool Walton, said: ‘As the city faces a second wave of Covid-19, the new Royal Liverpool Hospital stands tragically idle – a monument to corporate greed.

‘It’s a scandal that, prior to its collapse, public money continued to be funnelled into Carillion. As the company’s debt soared and suppliers went unpaid, executives protected their generous bonuses.’

The old Royal Liverpool was found to have ‘intrinsic flaws’ in its design as far back as 1999, with a report backing plans to replace it five years later.

Carillion was handed the contract under a Private Finance Initiative (PFI) deal in 2012 and agreed that it would be delivered by 2017. 

PFI schemes started under John Major’s Conservative government and were then enthusiastically embraced by Labour, with former chancellor Gordon Brown using them to build schools and hospitals while keeping the costs off Government books.

Under the schemes, private firms build, operate and maintain public facilities under contracts lasting as long as 35 years. 

But critics say the arrangements were too generous to contractors. In Liverpool, the Government paid Carillion’s lenders £42million, even after the project had been hit by delays and jumps in cost, and when the company itself had gone bust.

The Royal Liverpool was affected by the discovery of cracks in load-bearing beams and water leaks that contributed to it being five years behind schedule. It plunged even deeper into chaos when Carillion failed.

New contractor Laing O’Rourke has since been brought in to complete the project. But it is still not expected to finish until 2022 because of further defects, leaving the city reliant on the outdated current hospital.

A BBC documentary last year revealed a litany of problems in the old hospital including electrical faults, broken lifts and flooding. 

By comparison, the new hospital is set to feature modern facilities, an improved layout and 646 single rooms for patients that will help ‘improve the control of infections’.

Lord Prem Sikka, a professor of accounting at the University of Sheffield, said the project was a grim example of corporate disasters. 

He added: ‘Because of Carillion’s collapse, nearly 30,000 small and medium-sized businesses suffered, and thousands of employees lost jobs and some pension rights. Taxpayers gave Carillion millions for hospitals and got little in return.

‘Nearly two years later, there has been no action against directors.’

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