Construction giant Carillion – which issued a profit warning this month as it grapples badly-performing contracts – is among the companies that have been chosen to build phase one of the HS2 rail line.
The announcement injected some life back into the firm’s battered share price on Monday – a week after its chief executive quit when Carillion admitted an £845m hit to its finances.
Shares rose 8% in early deals as a string of major firms were awarded contracts to design and construct bridges, tunnels, embankments and viaducts for the infrastructure project – expected to cost £55bn.
The other companies included Skanska Construction UK, Costain and Balfour Beatty.
Nine bids were shortlisted for the project’s major contracts with the work valued at around £6.6bn and estimated to support 16,000 jobs.
Transport Secretary Chris Grayling defended the choice of Carillion, telling Sky News: “They’re part of a consortium – they’re not alone in the contracts, and we’ve had secure undertakings from all the members of the consortium that they will deliver that contract.
“So it’s not where one business has to deliver, it’s a group of businesses that have to deliver, and they’ve all committed to doing so.”
Mr Grayling added: “My wish is that Carillion get through their current problems, but we’ve made sure that it’s not an issue for these contracts.”
Image: Viaducts are among the construction projects to be undertaken
Carillion – along with Eiffage Genie Civil and Kier Infrastructure and Overseas – won lots C2 and C3, involving the building of tunnels, worth £724m and £616m, respectively.
The firm’s interim chief executive, Keith Cochrane, said: “We are delighted that our joint venture, CEK, has been selected to deliver two of the three Central contracts for HS2 Phase 1, the London to Birmingham section of the route, reflecting the strength of our joint venture.”
While it is welcome work for Carillion, it is currently struggling to contain rising debts – a consequence of cost over-runs on other key contracts.
:: The winners and losers in Carillion profit warning
Mr Cochrane confirmed in a separate announcement that professional services EY was being brought in to “bring an external perspective to our cost reduction and cash collection challenge”.
He said his priorities were to “reduce the group’s net debt and create a balance sheet that will support Carillion going forward”.
Despite the positive share price reaction on Monday, its stock remains almost 70% down on where it was trading early last week.
The route of the Manchester and Leeds section of HS2 will also be announced later.
In November last year, ministers said the line should serve the existing central station in Sheffield, after proposals to run trains to the Meadowhall shopping centre were set aside.
But this could see new homes in nearby Mexborough being pulled down, with many of the estate’s residents finding out about the possibility just weeks after moving in.
Image: Houses in Mexborough, South Yorkshire, where residents could lose their homes
The first phase of the project – between London and Birmingham and from Birmingham along the existing West Coast Main Line – was given the go-ahead in February and is due to open in December 2026.
A bill will be published shortly covering phase 2a – from the West Midlands to Crewe and which is expected to open the following year – while phase 2b from Crewe on to Manchester begins in 2033.
Joe Rukin of the Stop HS2 campaign said: “The case for HS2 has been invented by the very cheerleaders who intend to rake in billions of taxpayers’ money which is desperately needed elsewhere, so it really is time to ditch this gigantic white elephant before it is too late.”
The news comes after The Sunday Times published an interview with rail expert Michael Byng, who estimated that HS2 would cost more than £400m per mile, making it the world’s most expensive railway.
This would see the project cost up to £104bn – almost double the Government’s estimate.
A Department for Transport spokesman said Mr Byng’s claims were “incorrect” and insisted: “We are keeping a tough grip on costs and the project is on time and on budget at £55.7bn.”