Carillion - The Fault of Public Sector Outsourcing

Construction - The Fall of a Giant

Carillion, Britain's second largest construction firm together with several of its subsidiaries went bust on Monday 15 January 2018. It going to the wall is a clarion call for all builders in U.K. and for that matter for all firms who contract out and subcontract work out - construction or other services.

Outsourcing has been the name of the game in the early 21st century, that was the end game.

Failure in outsourcing public sector work has enormous implications. It is the small firms which are the backbone of British business and industry which suffer the most.

Carillion's insolvency will no doubt "cripple a substantial number of extensive network of local suppliers and contractors, some 25 to 30,000 small businesses, who are owned money by it."

Labour Party is preparing to force a vote in the Commons over the risk assessments for Carillion before the Company went bust.

The history of the construction business is strewn with big names going to the wall or disappearing out of sight overnight. Where are "Tarmac," "Mowlem",and some others. Nobody talks of them now.

Of the Top 100 Construction Companies in UK in 2017, many have foreign nationals as Finance Directors and strangely many have red ink over their balance sheets. 

Besides,in the case of Carillion some 43,000 staff worldwide and 20,000 in Britain are now on the dole heap, all because of what Carillion "was what it was" -" when it was a builder" or, when it was called Tarmac in 1993. It moved out of mainly building work into support services work. 

Among the outsourced service work was to provide school dinners as well as cleaning and catering services at NHS hospitals.According to sources in the BBC it's failure was due to cost overruns on big projects and problems with projects in the Middle East. 

The HS2 High Speed Rail (North-South) project was a mega-project that the public will remember when they connect with Carillion, in the U.K.

It's  former Finance Director was Zafar Khan until September 2017. According to reliable sources "he will get away with £425,000 in base salary for 12 months, while Interim Chief Executive Keith Cochrane will receive £750,000 salary until July 2017,despite leaving the Company in February 2017". Its auditors were KPMG reporting losses of £1.5 billion when it signed off its 2016 accounts. 

In Parliament today 24 January 2018, the Government has assured the public that it will pursue its Directors. Business Secretary,Greg Clark has been quoted to say that "the Government will urge HMRC to use leniency when  collecting taxes from Carillion suppliers owed money.What this means, remains to be seen."

The High Court has appointed the Official Receiver as Liquidator.We are told employees should receive early notification from the Liquidator whether he intends to employ them."This is realistically only likely if they are engaged on government connected contracts."

Disclaimer: This feature blog has been compiled with the best sources available at time of writing. It should be considered as informative only and is not complete in all respects.