A guest briefing from LGC’s sister title Construction News about Carillion’s collapse.
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“I can’t help feeling all of this is after the horse has bolted,” said Rachel Reeves (Lab), chair of the business, energy and industrial strategy select committee.
And it’s true.
Sitting in Portcullis House Tuesday morning at the select committee’s post-mortem of Carillion’s demise, you couldn’t help but feel it was all a little too late for those hit by the liquidation two weeks ago.
But there was also a feeling of, ‘Why didn’t we see it coming?’
When laid out in full narrative form, as it was in that meeting, the past few years clearly threw up warning after warning that Carillion was in significant trouble.
Why didn’t we take notice when the Financial Reporting Council began asking questions over contract assumptions made by Carillion’s management in its 2015 accounts?
Why didn’t we take notice when Carillion shares became, and remained, the most shorted stock on the market for years?
Why didn’t we take notice when the company’s pension liabilities continued to grow and grow?
But hindsight is a wonderful thing. Some of the most experienced figures in the construction and finance sectors didn’t see this coming.
And if looking back fills the sector with regret, looking forward for many will fill it with despair.
Insolvency Service chief executive Sarah Albon slammed the firm’s “incredibly poor record keeping”. It could still take a number of months before her organisation fully understands the scale of what it is investigating, she admitted.
And when it finally gets there, subcontractors shouldn’t hold out much hope of seeing any money coming their way.
As Ms Albon explained, there doesn’t even seem to be any money to pay the estimated £50m costs of “winding up the company”, never mind its creditors.
This shouldn’t happen again; lessons need to be learned.
Lessons not only for plcs working in the construction sector, but also for the government on how it acts when one of its suppliers faces similar troubles and the powers it gives to the regulators to help avert future crises.
Construction News has repeatedly heard from subcontractors that took the government handing Carillion contracts after its profit warning as a sign that the firm was fine.
Awarding deals and saying you are confident Carillion can deliver publicly, while drawing up contingency plans at Whitehall in anticipation of the firm’s collapse behind closed doors, reeks of duplicity.
Having one of your key regulators, the FRC, investigating the firm for seven months but not being able to tell anyone publicly, also seems ludicrous.
These issues need to be addressed. After all, the fallout of Carillion’s collapse is not just about boardrooms and bonuses, nor council services.
As MP Ruth George (Lab) put it: “It is about people not being able to pay their mortgages, pay for childcare or cover all the other costs of everyday life.”
By Jack Simpson, infrastructure reporter for Construction News