Government’s Inaction Risks Further ‘Carillion-Style’ Meltdowns

THE GOVERNMENT’S inaction, a year after Carillion’s collapse, is putting jobs at risk and could result in future corporate meltdowns, warns Unite.

Carillion went into compulsory liquidation on 15 January 2018, with £7 billion of liabilities and just £29 million left in the bank. Experts believe that Carillion had been trading while insolvent for several years prior to its collapse.

As a result of the company’s collapse nearly 3,000 of Carillion’s staff were made redundant with many other workers in the company’s supply chain also losing their jobs. Many of Carillion’s sub-contractors were also forced out of business.

The cost to the taxpayer for Carillion’s collapse is in excess of £150 million. Much of this money has been paid to accountants PwC, who have been paid in excess of £50 million to act as ‘special managers’ to break up the company, make workers redundant and transfer outsourced contracts to new providers. On average PwC staff were paid £356 an hour for their work.

The cost to the taxpayer for making Carillion staff redundant is estimated to be £65 million.

Flagship projects
When Carillion went bust, its two flagship construction projects were the Royal Liverpool hospital and the Midland Metropolitan hospital in Sandwell, West Midlands. Work on both projects stopped immediately and a year later has not restarted. The cost of both projects has rocketed and both hospitals will be at least three years late before they are operational.

Despite the scale of Carillion’s collapse, no action has yet been taken against any of Carillion’s directors or senior managers, despite longstanding investigations by the regulator into accountants and auditors, the Financial Reporting Council (FRC) and the Insolvency Service. There have also been suggestions of investigations into potential insider trading. The delay in action led Unite to call for an immediate criminal investigation into Carillion’s collapse in September last year.

The government has rejected all calls for substantial reforms to prevent further Carillion-style collapses. The only noticeable change is that the government is piloting a policy that requires major outsourcing companies with public sector contracts in financial difficulties to produce a ‘living will’ to detail how services can continue to be run following a company’s demise.

Unite assistant general secretary, Gail Cartmail, said, “The government’s failure to take action to ensure that there cannot be similar collapses in the future is a betrayal of workers, who still face being cast on the scrapheap without warning because of irresponsible directors who place profits and shareholder dividends before people.

“The fact that no one involved in Carillion has yet had any form of action taken against them, demonstrates either that the regulators are failing to do their jobs or that existing laws are too weak. If it is the latter then we need better stronger laws.

“A year on from Carillion’s collapse the government needs to stop prevaricating and start taking effective action to drive bandit capitalism out of the UK.”



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