HS2 has been forced to issue a warning to construction firms across the entire 140-mile project after a supplier was sacked over the tax status of workers.
The i Paper revealed this weekend how Balfour Beatty, which is building 55 miles of the West Midlands section of the high-speed rail route, has terminated “all agreements” with Danny Sullivan Group.
The sub-contractor, a family firm based in London for more than 30 years, has been supplying around 500 workers to the Birmingham site – but all were informed on Friday afternoon that their employer has been sacked.
The company denies all allegations of tax fraud, and says its own external review found no evidence of “deliberate wrongdoing involving any employees”.
The dramatic intervention is the latest headache for HS2 Ltd, the government-owned company responsible for building the railway, which has faced criticism after years of delays and ballooning budgets on the project.
Chief executive Mark Wild, who took over at the start of this year, has already admitted the civils phase of the building work is significantly behind schedule, and Transport Secretary Heidi Alexander confirmed HS2 will not open in 2033 as originally planned.
A revised final cost is expected to be revealed by the end of this year, with some reports claiming it is likely to go beyond £100bn.
The i Paper understands bosses believe they can handle the sacking of Danny Sullivan Group with as little disruption as possible by transferring workers to Balfour Beatty or other suppliers.
However, Danny Sullivan Group continues to supply hundreds of workers on other sections of HS2.
Rishi Sunak axed HS2 north of Birmingham in 2023Bosses have contacted all other contractors currently building Phase One between London and Birmingham informing them of developments and requesting “urgent reassurance with regard to any continued employment of Danny Sullivan Group”.
HS2 is also carrying out a “detailed” investigation of its own.
“HS2 Ltd takes its responsibility for managing public money seriously,” a spokesperson said.
“Unethical behaviour will not be tolerated, and we fully support our supply chain partners in rooting it out.
“HS2 Ltd is continuing to conduct further investigations into labour supply contracts across the supply chain.
“A formal referral has already been made to HMRC, and we encourage anyone who believes they may have relevant information, which could support our enquiries, to report it in confidence via HS2’s Speak Out channels.”
HS2 has faced fraud allegations for a number of years, with several whistleblowers having claimed their warnings of increasing costs were deliberately ignored.
HS2 has said these claims are false, however new claims around the alleged misclassification of workers first surfaced in February this year.
Whistleblowers claim Danny Sullivan Group has been falsely declaring self-employed workers as PAYE (Pay as You Earn) salaried staff and charging an inflated rate for them.
Danny Sullivan Group was initially suspended from supplying new workers to the West Midlands section of the route pending an investigation carried out by Balfour Beatty and overseen by HS2’s central fraud unit.
Similar claims were made about a second company, though they were later reinstated.
square NEWS ExclusiveHS2 contractor sacks firm following 'tax fraud' investigation
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Regarding Danny Sullivan Group, Balfour Beatty concluded it was “misinformed” about “the provision of Construction Industry Scheme [CIS] workers instead of PAYE employees, in breach of their agreements”.
Danny Sullivan Group said in a statement: “After extensive discussions on our commercial arrangements and contractual terms, Danny Sullivan and Sons will cease its provision of skilled trades and labour to Balfour Beatty.
“This decision follows the completion of a review, commissioned by Danny Sullivan and Sons, into the erroneous engagement of a number of [CIS] workforce operatives. Throughout this review process, no evidence of deliberate wrongdoing involving any employees of our business was identified.
“Individuals affected by this decision will continue to work with Balfour Beatty and we are working to mitigate the impact with minimal interruption.
“Our externally-led review was carried out in conjunction with significant investment in enhancements and transformation to the company’s processes, technology and culture – supporting our ongoing and future partnerships with long-standing clients who trust us to deliver projects at the heart UK infrastructure.
“Our work continues across UK infrastructure projects and we are proud to be operating at a size and scale not seen before in our business with a renewed focus on the highest standards of governance alongside significant operational improvements.”
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