Archive: January, 2018

My mess for less

WHAT does the Royal Opera House, MoD homes and hospital dinners have in common? Perhaps not much, which may be one reason for the dramatic collapse of Carillion, the construction to services group. On 15th January the firm went into liquidation, jeopardising the prospects of its 43,000 employees, 30,000 subcontractors and the fulfilment of 350 government contracts stretching three decades into the future.

Governments from Margaret Thatcher’s to Theresa May’s have wanted to expose moribund state monopolies to the competition and innovation of the market. This theory might sound very attractive in Whitehall but the reality is somewhat different. I’ve worked for a number of outsource providers and it feels more like government wants to trade “my mess for less”.

Although much of the work seems mundane, it is often difficult to automate and relies on long complex supply chains. This means that cash flow becomes the most critical factor. In the case of Carillion, it was liquidated with just £29m cash and more than £1.5bn of debt, leaving pensioners and creditors with big losses.

Although all the evidence is yet to be gathered, the fact that Carillion funded dividends from the sale of assets in 2017 and the shares have been shorted for longer suggest that there was a failure in management.

The last words goes to Walter Howells who runs Howells Patent Glazing: “Carillion was reviled among subbies. There will be those who are dancing on its grave. They were always late paying, it was always 120 days. You got the impression their accounts department’s job was to delay payment as long as possible.”