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End bandit capitalism call

Carillion collapse one year on – Unite calls for government action
Hajera Blagg, Monday, January 14th, 2019

Unite has reiterated its call for a full public inquiry and criminal investigations into Carillion, on the eve of the first anniversary of the firm’s collapse on Tuesday (January 15). The union further warned that more ‘corporate meltdowns’ would be on the horizon if the government failed to act.


Early one Monday morning last year on January 15, news broke that construction giant and outsourcing firm Carillion had collapsed into administration under a debt pile of £7bn, with only £29m in the bank.


Paying the price

About 3,000 direct staff were made redundant with many more in the supply chain losing their jobs; construction companies that relied on business with Carillion went bust as well.


Work on key public sector projects, such as Royal Liverpool and Midlands Metropolitan Hospitals, was stopped immediately and a year later has not restarted. As the cost of these hospitals skyrockets, so too, do the delays – neither hospital is expected to be operational until three years after they were originally set to open.


Such delays have added to the enormous strain on staff at the older hospitals that these two new hospitals were set to replace, in effect adding to patients’ misery.


And while not a single company director or senior manager has paid the price for Carillion’s mismanagement, the taxpayer is left to foot the bill. It is estimated that the total cost to taxpayers of Carillion’s collapse will exceed £150m, with £65m being paid out by taxpayers for redundancies alone.


Much of this taxpayer money will be paid to accountants PwC who have been rewarded in excess of £50m to act as special managers to break up the company, make workers redundant and transfer outsourced contracts to new providers. On average PwC staff are earning more than £350 an hour for their work.



Today (January 14) it was further revealed that hundreds of apprentices dropped out of education or employment after Carillion’s demise, despite the government spending £3m trying to keep them in work.


About 163 Carillion apprentices dropped out of employment, education and training altogether in the last year, while 149 went to find work elsewhere.


Unite assistant general secretary Gail Cartmail told the Huffington Post that the apprenticeship revelations “demonstrate the direct human misery and loss of talent caused by Carillion’s collapse”.


“At a time of acute and growing skills shortages in the construction, the loss of any apprentices further severely weakens the industry and undermines its future,” she said.


“The government is the construction industry’s largest customer — it was a huge failure of political will that jobs could not be found for over 300 displaced Carillion apprentices.


“These figures further underline that the government failed to protect the innocent victims of Carillion’s collapse and that it is has not learnt the lessons from the biggest corporate failure in the UK in modern times.”


The extent of Carillion’s mismanagement is also now starting to come to light, with financial writer Frances Coppola telling Dispatches last year that Carillion “was effectively insolvent as far back as 2016”.


Ponzi scheme

Also on Dispatches, former auditor general Sir John Bourn and others likened Carillion to a ‘Ponzi scheme’ because it acquired contracts to increase turnover and cash flow and used small contracts to offset large ones that were loss-making – in effect constantly losing money.


“It is staggering that a year after the biggest corporate failure in modern UK history the government has carried on as though it is business as normal,” 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,” she added.


In fact, the only change the government has made in its relationship with outsourced companies after Carillion is piloting a policy that requires major 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.


It’s a policy that Unite acting national officer for local authorities Ian Woodland said showed the government had “lost the plot”.


“Not only does the ‘living will’ proposal show that the government’s outsourcing policies are on life support, but they are once again guilty of abdicating their responsibilities,” he said in November. “If a major outsourcer collapses the last people you are going to trust to provide advice on how to maintain a service is the management who ran it into the ground in the first place.”


Cartmail said today that 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.


“Taxpayers were handed a bill of over £150 million to clean up the mess left by Carillion, yet the government has failed to end bandit capitalism in the UK,” she added.


“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.”


Find out more about Carillion and what action Unite believes must be taken in Ending Bandit Capitalism: Learning the lessons following Carillion’s collapse.


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