§ Mr. Urwinasked the Secretary of State for the Environment whether any difficulties have arisen over the completion of public sector construction contracts over related matters affecting the national interest; and if he will make a statement.
§ Mr. FreesonThe financial position of Drake and Cubitt Holdings Ltd. has placed in jeopardy the completion of major contracts currently being undertaken by its subsidiaries in building and civil engineering—Holland, Hannen and Cubbits Ltd.—and in mechanical and electrical engineering—Drake and Scull Engineering Ltd.
The company has negotiated the sale, subject to certain conditions, of Holland, Hannen and Cubitts Ltd., which would ensure completion of that company's contracts. But unless special assistance can be provided, the financial position of Drake and Cubitt Holdings would be such that the sale could not be concluded and that all the contracts would be at risk.
The extra costs to public funds if the contracts, on which some £50 million worth of work remains to be done, were 978W not duly completed would be substantial and there would be serious delays to important projects. There could also be a substantial short-term increase in unemployment, and major overseas business would be at risk. The Government have therefore concluded that it would be in the national interest to make assistance available to the company under the powers of the Industry Act 1972.
An agreement has accordingly been concluded with the company and its principal bankers under which approximately £70,000 will be provided now and sums up to a maximum of a further £1,750,000 may be provided over the period to 31st October 1980 in circumstances defined in the agreement.
The agreement is conditional upon the approval of the company's shareholders, the completion of the sale of Holland, Hannen and Cubitts Ltd. and, the conclusion of a satisfactory agreement between the company and the Banque Bruxelles Lambert for the settlement of a loan.
The provisions of the agreement include the following:
all payments will be made in the form of subscription for part of a new class of convertible cumulative redeemable preference 979W shares, carrying a fixed cumulative dividend of 8.45 per cent. as from 1st August 1978;such shares shall at the option of the Secretary of State be convertible into ordinary shares of the company at par (the exercise of this option could lead to a holding of up to 41.3 per cent. of the ordinary share capital); and are redeemable between 1983 and 1990;the Secretary of State shall have the right to nominate a director of the company;the Secretary of State shall have the right to monitor closely the financial position of the company;the acquisition or disposal of substantial assets and the payment of ordinary dividends are subject to the Secretary of State's consent;arrangements are set out for the provision of banking facilities.It is now for the companies concerned to ensure that the public sector contracts are duly completed.