Carillion Collapses

So what the heck is Carillion and why should we care?

The company that runs Britain is near to collapse. Watch and worry: Carillion builds schools, roads, hospitals – and it’s meant to be a big part of HS2. What’s more, if it goes bust, the bill will be picked up by taxpayers

Why we should care:

To see what this means, take the HS2 rail link, where Carillion this summer was part of a consortium that won a £1.4bn contract to knock tunnels through the Chilterns. If Carillion goes under, what happens to the largest infrastructure project in Europe? What happens to its partners on the deal, British firm Kier, and France’s Eiffage? The project will need to be put back and the taxpayer will almost certainly have to step in.

Imagine that same catastrophe befalling dozens of other projects across the UK and you get a sense of what’s at stake. Jobs will be cut, schools will go unbuilt (just a couple of months ago, Oxfordshire county council pulled the plug on a 10-year schools project) – and the government’s entire private finance initiative (PFI) model for building this country’s essential services will be shaken to the core. The dirty secret of PFI and all government attempts to pass public services into the private realm is that the shareholders make profits while the taxpayers remain on the hook for any losses.

This is exactly the type of private/public infrastructure partnership that Trump and the GOP want to implement to Make America Great Again!

That story was this morning and now it is official:

Carillion collapsed on Monday when its banks pulled the plug, triggering Britain's biggest corporate failure in a decade and forcing the government to step in to guarantee public services from school meals to roadworks.

The 200-year-old business went into compulsory liquidation at 0600 GMT after costly contract delays and a slump in new business left it swamped by debt and pensions liabilities of at least 2.2 billion pounds ($3 billion).

Carillion is a global powerhouse:

Employing 43,000 people around the world, including 20,000 in Britain, Carillion has been fighting for survival since July, when it revealed it was losing cash on projects and had written down the value of its contract book by 845 million pounds.

With banks refusing in recent days to accept the latest restructuring plan, May's senior ministers met around the clock, under pressure from the Labour Party and unions not to use taxpayer money to prop up the failing company.

It seemed like a good idea at the time:

Britain began outsourcing public services in the late 1980s under Margaret Thatcher and enjoyed a boom period under Labour's Tony Blair and Gordon Brown. It is now the world's second-largest outsourcing market behind the United states.

The total impact is not yet known:

Rudi Klein, head of Britain's Specialist Engineering Contractors' Group, warned that the impact was likely to be felt by small contractors. He estimated Carillion had left a trail of 1.2 billion pounds in unpaid bills to thousands of small subcontractors.

Klein said the scale of the industry's exposure was not yet clear but he gave the examples of a small Northern Irish engineering contractor owed 150,000 pounds and a concrete frame manufacturer in northwest England owed 2 million pounds.

There are a half dozen additional stories with embedded links here:

http://mobile.reuters.com/article/amp/idUSKBN1F40P0

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How refreshing. Biggrin
Government kept awarding public sector contracts to Carillion despite fears about its future, minister admits

Mr Lidington said there would not be a fire sale of Carillion's assets. The Government would continue to pay for Carillion's services "as they are received" and cover PwC's costs, as well as "associated insolvency costs".

Mr Lidington added: "The message to workers is 'come into work today, there is important work to be done and you will be paid. The Government will pay your wages via the official receiver not via Carillion'.

"It will go into a different bank account but that money that has been budgeted for, for your wages for those public service contracts is there because we want that continuity to be assured.

"As we go forward some services will be taken in house, some services will go out to alternative contractors in a managed orderly fashion."

That's nice. The other telegraph bookmark I have is this from 2016: The era of robots: thousands of builders to lose jobs as machines take over, says construction boss

The result would be huge productivity gains as more work could be done by fewer people – but also mass layoffs as traditionally labour-intensive construction projects hire fewer and fewer staff.

“We’re moving into the era of the robots,” said Alison Carnwath, the chairman of Land Securities, the £8.2bn FTSE 100 construction company.

Speaking at the Institute of Directors’ annual convention, the veteran businesswoman said the pace of technological change has taken her by surprise.

huh

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Amanda Matthews's picture

@eyo
payouts and cover those payouts by not paying the bils, something’s gotta give.

Carillion under fire for raising dividend as pension deficit grew
Thousands of members of multiple retirement schemes face cuts to benefits

Carillion on Monday came under fire for rewarding shareholders with dividend increases as its pension shortfall, or the difference between its assets and liabilities, grew to £587m, reported in its interim results last year, from £317.6m at the end of 2015.

“[The] 2016 Carillion annual report says the dividend ‘has increased in each of 16 years since formation of company’,” said Sir Steve Webb, former pensions minister and director of policy with Royal London, a pension provider.

https://www.google.com/amp/s/amp.ft.com/content/ceeeb2a4-f9ee-11e7-a492-...

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I'm tired of this back-slapping "Isn't humanity neat?" bullshit. We're a virus with shoes, okay? That's all we are. - Bill Hicks

Politics is the entertainment branch of industry. - Frank Zappa

Alligator Ed's picture

@Amanda Matthews if you are in the 1%.

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Wink's picture

in her grave!
"That will fix the little people with their hands out for more! Let them eat cake, I say!"
Yet another victory for the 1%.

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the little things you can do are more valuable than the giant things you can't! - @thanatokephaloides. On Twitter @wink1radio. (-2.1) All about building progressive media.

thanatokephaloides's picture

@Wink

ol' Maggie Thatcher dancing in her grave!
"That will fix the little people with their hands out for more! Let them eat cake, I say!"

"Please, sir, may I have some more?" -- Charles Dickens, Oliver Twist

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"I say enough! If Israel wants to be the only superpower in the Middle East then they can put their own asses on the line and do it themselves. I want to continue to eat."
-- snoopydawg

Song of the lark's picture

Got Puerto Rico, Detroit, Stockton CA, and now Carillion. Debt monster spawning hundreds of progeny.

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riverlover's picture

as unneeded debt. The littles will suffer more than the bigs.

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Hey! my dear friends or soon-to-be's, JtC could use the donations to keep this site functioning for those of us who can still see the life preserver or flotsam in the water.

TheOtherMaven's picture

That's a large-ish SCA group in central New Jersey. I always wondered where they got the name, and hope they didn't just swipe from the Brits.

Not sure they'd want to be associated with this debacle. Smile

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There is no justice. There can be no peace.