Business News

CCTV Script 16/01/18

— This is the script of CNBC's news report for China's CCTV on January 16, Tuesday.

British construction and services giant Carillion collapsed on Monday when banks refused to lend it any more money. This comes after discussions over the weekend among Carillion, its lenders and the government failed to save the UK's second-largest construction company, which is buckled under the weight of a whopping £1.5bn debt pile.

Indeed, the announcement came as a surprise to many that Carillion was forced into compulsory liquidation, as they believe that this 200-year-old company have been enjoying a very close relationship with the U.K. government, which makes it "too big to fall".

Indeed, tensions around Carillion have been ratcheting up for weeks, forcing the government to hold a string of crisis meetings to discuss how they should respond. Unions and the opposition Labour Party had argued that taxpayers should not bail out the failing company.

For those who are not so familiar with the name, let me quickly go through Carillion's profile -- what does it mean to UK?

Well, it's the company that employs 43,000 people around the world, including 20,000 in Britain. It runs public services from hospitals to train lines and ministry of defense sites.

It's the company that has built construction projects such as London's Royal Opera House, the Suez Canal road tunnel and Toronto's Union Station. In July last year, it won contracts to build Britain's new High Speed 2 rail line, a major project that will better connect London with the north of England.

But also, it's the company that's been trapped in debt after costly contract delays and a downturn in new business that prompted a string of profit warnings and a first-half loss of more than 1 billion pounds.

Now, many may ask, what caused it's collapse? The company saw its shares hovering around record-highs in 2015, reporting very positive earnings of 5.2 billion pound in 2016 and even in July last year, the company's cap market was around 1 billion pound. So again, what caused it's collapse?

Some argue that it overreached itself, taking on too many risky contracts that proved unprofitable. It also faced payment delays in the Middle East that hit its accounts.

Last year, it issued three profit warnings in five months and wrote down more than £1bn from the value of contracts.

This made it much harder to manage its mountainous £900m debt pile and £600m pension deficit.

Now, the big concern is... given Carillion holds so many government contracts - from building hospitals to managing schools, how much disruption would the company's collapse cause?

Many government officials have warned before the announcement that if it went under, it would risk "massive damage" to a range of public services, including thousands of jobs hanging in the balance.

Unions have said workers do not deserve to be caught in the crossfire and have urged the government to safeguard their jobs and bring Carillion's contracts back in house.

The government, which has praised Carillion's work on projects such as Crossrail, has said it will provide funding to maintain the public services run by the firm.

Analysts also say Carillion had a large order book of business lined up.

The other big question is, who will ultimately pick up its loss-making public contracts - another outsourced services provider or the government itself?

CNBC's Qian Chen, reporting from Singapore