News | Published January 17 2020

Carillion collapse doubles hospital construction costs

According to figures released by auditors, and confirmed by the National Audit Office, the cost of the construction of two new hospitals has almost doubled following the collapse of Carillion.

Carillion, a construction giant, collapsed when it went into liquidation in January 2018. According to these new figures, the effects of this collapse are still being felt both in terms of delays and costs to projects Carillion was involved with.

The two hospitals affected are the Royal Liverpool Hospital, which is now due to open five years later than planned, and the Midland Metropolitan Hospital in Smethwick. Both hospitals are now expected to open in 2022.

Alongside the delay to its opening, the collapse of Carillion has led to the projected cost of the construction of the Royal Liverpool Hospital to increase significantly. When the original business case was submitted, the estimated cost of the project was £350 million; it is now expected to come to £724 million.

This includes £293 million for remedial work and an additional £369 million which will be spent on maintaining the hospital for the next 30 years. The cost may increase further, however, with auditors warning there are “particularly significant risks” of further increases and delays, largely because there are “some issues which are not yet resolved.”

The Midland Metropolitan Hospital has also suffered significant setbacks and is now not expected to open until July 2022 – three years and nine months after originally planned.

The total cost of the project has also increased by £300 million to £998 million. A large part of this cost will be borne by the taxpayer and the public’s contribution has also increased by three per cent, rising to £709 million. While this increase is being supported by public funds, the NAO found that across both hospitals, the private sector has borne most of the total 98 per cent increase.

After Carillion collapsed, works were stopped on both hospitals as efforts were turned to saving the projects themselves. When these efforts proved unsuccessful, the government cancelled the previously-agreed PFI contracts and decided to use public financing to complete the projects.

Commenting on these delays and cost increases, Gail Cartmail, the assistant general secretary of Unite, said: “Two desperately needed hospitals are going to be years late and in the meantime local communities are left with facilities that are no longer fit for purpose.

“The responsibility for these delays has to lie squarely at the door of the government, which consistently failed to prioritise the overriding need that these hospitals had to be built.”

A government spokesperson responded by saying: “As this report shows, the private sector has borne the brunt of Carillion’s catastrophic failure to complete these two projects.

“To support staff and local communities in Sandwell and Liverpool, we’re giving both trusts the funding they need to minimise the delays caused by the collapse of Carillion and get these two new hospitals open.” 

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Authored by

George Salmon
Political Editor
January 17 2020

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