Monday 15 January 2018

Carillion goes under - first reactions

There is plenty elsewhere on the not-so-swift demise of this huge UK corporate that the Government trusted with some very large infrastructure projects.

- The Government awarded them contracts last year because, according to the Govt advisers, not to do so would have sent them under sooner. HELLO!! Does anyone speak capitalism - if a comnpany is rocky, giving them more business creates a bigger hole for you down the road when it collapses. They are called profits warnings for a reason.

- Much criticism there is of outsourcing, but actually I wonder the role here of Government pushing for too harder a bargain and crazy contractors signing up in the belief that somehow they can deliver to the budgets. They can't and instead we have this. There is a lot of this in the building sector at the moment, Mace has seen profits turned into losses, Lang O'Rourke managed to lose £141 million last year. These are private sector companies doing private deals, but the market has really turned against them. Companies and Government want cheap builds and the greedy company directors are either not walking away or are too afraid of foreign competition.

- Brexit does have impacts, falling investment has reduced the number of projects in the UK, with more competition for those that are left on the table (some big ones like Crossrail are ending).

- The Construction industry is a lot less healthy than the markets think, even house building is coming off what have been an amazing run - inflation costs and a slowing housing market are taking the margins right off the sell prices and the land banks were all acquired at market peaks of late.

- Finally, the siren labour call will be for this kind of work to be done direct by the Government, I really don't see how that helps with the price controls or quality control for the government. It will only stop the projects failing, because, umm, the Government can throw more money at it. So trying to move this work into the public sector will simply create a big moral hazard problem.


Nick Drew said...

Does anyone speak capitalism?

Not in the Civil Service or local government, that's for sure - see Defence procurement, public IT projects, PFI/PPI etc etc


James Higham said...

Some of the tales I hear inside about the work practices leave one only wondering why it didn't happen sooner.

rwendland said...

I almost feel sorry for former Euro Disney employee(!!) Justin Read who became a non-executive director of Carillion last month in Dec 2017. Seems like he was more interested in the fees than doing a bit of background research before taking the post. He was a group finance director 2011 to 2016, so no excuse. Can't be good competence item on his CV now!

And also of course former Blair underling Sally Morgan (Baroness Morgan) took her non-executive director of Carillion shilling just in July 2017. Maybe early enough to at least get some fees.

Tough and competent corporate governance? Hah!

Anonymous said...

Having spent a lot of my career selling into the public sector, they understand capitalism and monopolies rather too well.

Just look at the private care sector where Councils claim they cannot pay the going rate but expect private residents to cross-subsidise the NHS/Social care beds.

When they approach you and suggest "open book accounting" run for the hills.

dearieme said...

I only hope that the opportunity is seized to scrap HS2.

Anonymous said...

Where do they get ridiculous company names like that?

Bill Quango MP said...

Anon - it was next in the list.

After Consignia.

supansa said...
This comment has been removed by a blog administrator.
Suff said...

So what’s the governments response to try and reduce the contagion to all the supply chain? They will protect the public employees, so the baroness will get her shilling for irresponsible management. We need a clear out from top to bottom and FFS somebody put a wedge in that revolving door.

Charlie said...

According to BBC London News, who or what is to blame for the situation that numerous public bodies now find themselves in after this well-telegraphed collapse?

PFI. And who is to blame for the widespread use of PFI contracts to finance public spending off the books? Why, John Major of course.