Exactly four years ago, Carillion – a giant construction and services empire built on hoovering huge government contracts – spectacularly collapsed, with a debt pile of £7bn and only £29m left in the bank.
More than 3,000 directly employed workers were made redundant, with many more in the supply chain losing their jobs; construction companies that relied on business with Carillion likewise went bust.
It is estimated that in total, nearly 30,000 people were made jobless because of Carillion’s collapse. The overall cost to the taxpayer of one of Britain’s biggest corporate failures is said to have exceeded £150m, with £65m being paid out by taxpayers for redundancies alone.
Public projects helmed by Carillion are years behind schedule, including the construction of several hospitals whose delays have placed additional pressure on local health services creaking under the weight of the pandemic.
We now know that Carillion’s downfall was orchestrated by its various directors who lined their pockets with impunity as they drove the company into the ground. Meanwhile, the accountancy firms tasked with approving Carillion’s books signed them off and looked the other way.
And yet, for all the lives ruined by unimaginable greed, not one single person has been held to account.
Ahead of the anniversary of Carillion’s collapse on Saturday (January 15) we speak to Unite member and former BBC investigative journalist Bob Wylie. In 2020, his book Bandit Capitalism: Carillion and the Corruption of the British State, was named one of the Books of the Year by the Financial Times.
Bob is just as shocked and angry as any of us that, four years on, no one involved in Carillion’s failure has been made to pay for their crimes.
“If you’d asked me when I was writing the book in 2018, how many people from Carillion would end up in jail by 2022, I would have said, ‘Well the British establishment doesn’t have a great record of holding its favoured sons and daughters to account, but surely somebody’s going to answer for this’,” Bob (pictured below) tells UniteLive.
“This was a company with a £5bn turnover, but it goes bust with debts of £7bn and only £29m in the bank. Surely someone is going to have to carry the can? Today my biggest surprise is that four years on and not a hair on any of the heads of the executives, the managers, the accountancy group heads, the so-called regulators has been touched. Nobody has been held to account. It’s astonishing.”
In his book, Bob makes a striking comparison between Russian oligarchs and the British corporate class, as exemplified by the erstwhile heads of Carillion. He highlights how in the Yeltsin era, ‘perestroika’ became ‘catastroika’, with the businessmen we now know as the Russian oligarchs circling in like vultures to enrich themselves by milking the state.
“All sorts of deals were done and those who were on the make created a casino-style capitalism where they in essence bought Russia’s mineral riches at rock-bottom prices and overnight became billionaires,” he explained.
“Carillon is a classic example of this very same phenomenon. It started as a construction company. But by its demise it was running housing for the armed services; providing services for half the prisons in England; had 25 contracts for building and running hospitals; and had hundreds of contracts to repair schools, clean them and deliver school meals. This massive expansion was built on takeovers costing billions and a debt mountain it could not pay for. Eventually it became an industrial Ponzi scheme taking on more and more government contracts just to keep cash coming in.”
“This is why the heads of Carillion – the ‘Carillionaires’ as I call them – are in every which way cousins of the Russian oligarchs,” Bob adds. “They exploit for profit huge government contracts and they laugh all the way to the bank. What surprises me is there isn’t more outrage in British politics about this.”
But it wasn’t just the greed of Carillion’s top dogs that made possible one of Britain’s biggest corporate disasters, Bob notes. The various cogs in a system designed to prevent such misdeeds failed too, and so they are all equally complicit.
He points to the big accountancy firms like KPMG, which signed off Carillion’s books knowing that the company was facing a growing hole in its finances worth more than a billion pounds. Meanwhile, the various regulators – the Insolvency Service, the FCA, the Pensions Regulator and others also failed in their duties.
“The Pensions Regulator has 13 occasions where it can take legal action for the failures of the directors to pay legal amounts into the company’s pension fund, which in the case of Carillion was running a £900m deficit,” Bob explained. “So they had 13 occasions where they could haul the directors in and mandate them to pay into the workers’ pension fund and produce a plan that puts in black and white how they’re going to fix the pension hole. And they didn’t do it – not on a single occasion.”
And so the British people, Bob says, were hit by a ‘triple whammy’ in the Carillion scandal.
“For one, you’ve got all the directors on the make big-style; then you’ve got accountants cooking the books looking the other way permanently; and thirdly, you’ve got so-called regulators — watchdogs that are lapdogs – that don’t do anything. If we want to ensure another Carillion doesn’t happen again, we have to look at all three of these areas.”
This wholesale failure of the system, Bob believes, has worked to embolden ‘bandit capitalists’, who now see themselves as untouchable and unaccountable.
“I wrote up to 17 letters to all of Carillion’s directors to give them a chance to have their say in my book. I know the letters were received but not a single person replied – not one.
“When I was an investigative correspondent for the BBC in the early noughties, if you were to write to a chief executive and ask them why their company has a hole in its books of tens of millions – it would be unthinkable not to get a reply,” Bob noted. “This unaccountable, untouchable attitude has totally infected the corporate class in Britain today – this idea that we don’t have to answer to these journalists; that we don’t have to answer to anyone.”
And in a sense, who can blame them? Just this week, accountancy firm KPMG admitted misconduct in its audits of Carillion and apologised, but individual auditors now in the dock at a Financial Reporting Council tribunal continue to deny any wrongdoing.
Meanwhile, the Insolvency Service last year waited until the very last day it legally could to bring director disqualification proceedings against Carillion’s executives. While the case is ongoing, the Insolvency Service has suggested from the outset that the directors are unlikely to face any financial penalties. Again without shame, Carillion’s former acting CEO Keith Cochrane has since gone on to head engineering company Schenck Process.
“One’s cup does not overflow with optimism,” Bob says. “The sad truth is they get away with it because they know they can.”
Still, to fully understand what happened at Carillion and to ensure it never happens again, it is vital that we look at the bigger picture, as Bandit Capitalism does. Carillion is only a symptom of a wider disease, Bob notes.
“While Carillion is a specific corporate story of a corporate Ponzi scheme, it stands as a symbol of what is fundamentally wrong with British society,” he explains.
“The entire corporate world is defined by the maximisation of shareholder value. What we need is a stakeholder society where business considers not just who makes the money, but what it means for community, what it means for the workers and what it means for society in a broader sense. The maximisation of shareholder value needs to give way to a much better understanding of the need for a social contract.”
And while a complete transformation of business as usual may seem a tall order, we can work towards radical change by taking concrete steps.
“There’s a lot that can be done in the interim about inequality of wealth, about regulation, about wealth taxes, about wealth redistribution,” Bob explains. “And I’m convinced that the building of the unions is the way that some of these political issues can be driven. By building unions’ power on the ground, this will give all of these issues a heightened political power and urgency.”
You can purchase Bob Wylie’s book, Bandit Capitalism: Carillion and the Corruption of the British State on publisher Birlinn’s website here.