Carillion A55 road contract defended by Welsh Labour minister

Carillion have been involved in some of the UK's major public sector construction projects

The Welsh Government went ahead with a contract with Carillion after a warning about the company's health last year.

The construction and public services contractor, which collapsed on Monday, was involved in designing two junctions on the A55.

Finance Secretary Mark Drakeford told AMs the deal was signed before a profit warning in July, when the process was paused for officials to investigate.

But he said the collapse of Carillion would have "little impact" on Wales.

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Answering an urgent question in the Senedd on Tuesday, Mr Drakeford said: "The whole business of awarding a contract had been completed before the profits warning on July 10, but the contract letters had not been sent out to the company."

Those letters were withheld "and a further set of investigations were carried out with Carillion PLC to determine if there were risks that needed to be identified," the minister said.

"So there was a further period of due diligence in which formal assurances were sought and obtained from the company.

"Officials who were responsible for carrying out that assessment believed that the necessary assurances had been obtained."

Labour MPs have attacked the UK government for continuing to award contracts to Carillion, despite last year's warnings.

Mr Drakeford said the Welsh Labour administration had "always been alert to the dangers of a way of conducting business in which profit is privatised and risk is socialised".

There were also questions about how Carillion's collapse would affect the awarding of a major railway contract.

The firm was a partner in a bid, led by Abellio, to operate the next Wales and Borders rail franchise and build the South Wales Metro.

Plaid Cymru AM Adam Price asked whether the Welsh Government had discussed contingency plans with Abellio, one of three consortiums competing for the rail contract, after two further profit warnings about Carillion in 2017.

Mr Drakeford told AMs the Welsh government was taking legal advice on whether the collapse would have any impact on the franchise process.

Later, on Twitter, Mr Price said: "It seems - based on Labour Government's answers today - increasingly likely now that there will be just two bidders left in the Wales & Borders Franchise. Real negligence that contingency plans for Carillion collapse not put in place with Abellio as part of competitive dialogue."

On Monday, UK Cabinet Office Minister David Lidington told MPs there was "minimum exposure" in Wales to the collapse of Carillion.

"There are about 40 Carillion workers in Wales but they don't work on any public sector contracts", he said.

"Carillion have been sub-contractors to two contracts in Wales for a design phase and they were bidding as a sub-contractor to a rail contract."

Analysis by Sarah Dickins, BBC Wales economics correspondent

Carillion only plays a very small role within the Welsh economy. That is partly because Wales has not embraced PFI (private finance initiative) funding models with the enthusiasm seen in England.

Last September, Mark Drakeford said there had only been 23 schemes in Wales - and "very, very little new PFI in the devolution era" - with 21 of those schemes belonging to local authorities and the NHS, and not the direct responsibility of the Welsh Government.

Carillion, however, has had some limited presence in Wales. The Welsh Government awarded it the contract for design work for the A40 at Llanddewi in Pembrokeshire.

The company was also involved with a section of the A55 between Bangor and Holyhead, for UK Highways, before devolution. Then last year the Welsh Government awarded the design work to Carillion for development of the A55 between junctions 15 and 16 in Conwy county.

Perhaps the biggest question mark in Wales hangs over Carillion's relationship with the Dutch firm Abellio. They were partners in one of three consortia bidding for the all-Wales rail franchise which includes the South Wales Metro. The Welsh Government, whose Transport for Wales arm will determine who wins the contract, says it is seeking legal advice now that Carillion has gone into liquidation.

Carillion is working on the electrification of the main rail line west from London Paddington as far as Bristol. What we do not know is whether some of that work has been given to sub-contractors from Wales and whether there may be any medium-term impact to the Welsh economy because of that.

The Official Receiver - PwC - is advising Carillion workers and subcontractors to continue to work as normal. PwC's advice to contractors is that they will get paid for goods and services they supply from the date the Official Receiver was appointed.