The completion of two new hospitals whose construction was brought to a halt by the collapse of the government contractor Carillion has been delayed by two more years and will run hundreds of millions of pounds over budget, according to Whitehall’s spending watchdog.
The 646-bed Royal Liverpool, originally scheduled to open in 2017, is now forecast to be completed in the autumn of 2022 and cost more than £1bn to build and run compared with an original estimate of £746m, according to the National Audit Office.
A report released on Friday also found that the 669-bed Midland Metropolitan in Sandwell, which was due to open in October 2018, is now expected to open in July 2022 and will cost at least £988m – more than £300m over budget.
The delays and extra costs to the taxpayer have been seized upon by Labour and unions as the fault of Conservative ministers who were “asleep at the wheel” when the outsourcing giant went into liquidation in January 2018.
The hospitals were intended to be up-to-date medical facilities. They were funded by PFI, the controversial model where private firms are contracted to complete public projects and take debt off the government’s balance sheet.
Auditors said there were significant construction problems and delays before Carillion went into liquidation in January 2018 but the contractor’s collapse created more delay. Work on both sites stopped while the hospital trusts, government and private investors attempted to rescue the projects.
The full extent of construction problems at Royal Liverpool began to emerge after Carillion collapsed and over the course of 2018, the report said.
The interior of the building was almost completed when Laing O’Rourke, the new construction contractor, had to strip out three floors of the building and start major work to reinforce the structure with steelwork and additional reinforced concrete.
Cracks in concrete beams had rendered the structure unsafe, while the original designs were found to have major flaws, the report said.
It also emerged in September 2018 that the building was fitted with external cladding considered unsafe following the Grenfell Tower fire in west London, costing an extra £50m.
The Department of Health & Social Care paid £42m compensation to Royal Liverpool’s investors to terminate the PFI contract after government officials decided to reach a quick settlement to avoid delays and other unseen extra costs.
“But going for a quick settlement meant the department had to rely on the available estimate of the cost to complete, provided by the PFI company, its lenders and their advisers,” the report said.
The private sector has borne most of the cost increase, with shareholders, investors, insurers and Carillion losing at least £603m on the construction of both projects, auditors said.
The demise of Carillion was the UK’s biggest corporate failure in decades, affecting hundreds of thousands of people across the country.
More than 3,000 jobs were lost at the company, and the collapse affected 75,000 people working in its supply chain. It failed with debts of £7bn, more than its annual sales of £5.2bn.
The circumstances of Carillion’s collapse and its consequences are also being investigated by the Financial Reporting Council and the Official Receiver. Two years on from the collapse, MPs are still waiting for their reports.
Jon Trickett MP, the shadow cabinet office minister, said the delays in construction were “completely unacceptable”.
“The Conservatives must take responsibility for being asleep at the wheel,” he said.
Dr Chaand Nagpaul, chair of the BMA, said: “The cases of the Royal Liverpool and Midland Metropolitan highlight how these deals can collapse causing disruption and delays to the delivery of services and much-needed new facilities. This then inevitably impacts upon both patients and staff in local health services.
“What’s more, it is unacceptable that taxpayers should be expected to foot even a small fraction of the increased construction costs.”
A government spokesman said: “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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