Carillion is near to collapse. Watch and worry

[T_i_B]

I'm still wondering how Carillion got itself in financial trouble in the first place.

https://www.theguardian.com/commentisfree/2018/jan/12/building-company-carillion-collapse-schools-roads-hospitals-hs2-taxpayers-bill

You may never have heard of Carillion. There’s no reason you should have. Its lack of glamour is neatly summed up by the name it sported in the 90s: Tarmac. But since then it has grown and grown to become the UK’s second-largest building firm – and one of the biggest contractors to the British government. Name an infrastructure pie in the UK and the chances are Carillion has its fingers in it: the HS2 rail link, broadband rollout, the Royal Liverpool University Hospital, the Library of Birmingham. It maintains army barracks, builds PFI schools, lays down roads in Aberdeen. The lot.

There’s just one snag. For over a year now, Carillion has been in meltdown. Its shares have dropped 90%, it’s issued profit warnings, and it’s on to its third chief executive within six months. And this week, the government moved into emergency mode. A group of ministers held a crisis meeting on Thursday to discuss the firm. Around the table, reports the FT, were business secretary Greg Clark, as well as ministers from the Cabinet Office, health, transport, justice, education and local government. Even the Foreign Office sent a representative.

To see what this means, take the HS2 rail link, where Carillion this summer was part of a consortium that won a £1.4bn contract to knock tunnels through the Chilterns. If Carillion goes under, what happens to the largest infrastructure project in Europe? What happens to its partners on the deal, British firm Kier, and France’s Eiffage? The project will need to be put back and the taxpayer will almost certainly have to step in.

Imagine that same catastrophe befalling dozens of other projects across the UK and you get a sense of what’s at stake. Jobs will be cut, schools will go unbuilt (just a couple of months ago, Oxfordshire county council pulled the plug on a 10-year schools project) – and the government’s entire private finance initiative (PFI) model for building this country’s essential services will be shaken to the core. The dirty secret of PFI and all government attempts to pass public services into the private realm is that the shareholders make profits while the taxpayers remain on the hook for any losses.

[democratisphere]

1. What else is new. The tax payers are always bailing out the wealthiest

one way or another. Happened here after 2008 and it will be happening here again soon!

[bucolic_frolic]

2. How did we make it this far without all the stuff that Carillion hasn't built yet?

I'm all for convenience, but there are also fiscal sanity, quality of life issues, and does anyone have the time to pile on more with less time to do it?

[n2doc]

3. Same scam different country

Crony Capitalism at its best. I'll bet most of Parliament was being paid by Carillon.

[LeftishBrit]

4. Worrying. Very.

Either these vital projects will go down the drain, or more likely the taxpayers will have to bail them out. Or a bit of both. Frankly, as a taxpayer, I'd rather pay from the beginning to have these things done properly as public services, than have to suddenly step in when everything's in chaos.

[n2doc]

5. Has Collapsed

https://www.bbc.co.uk/news/amp/business-42687032

[T_i_B]

6. Responsibility lies with the board members for Carillion's collapse

https://www.theguardian.com/business/nils-pratley-on-finance/2018/jan/15/blame-the-board-for-the-carillion-collapse-it-was-deluded

Responsibility for Carillion’s collapse lies in the boardroom. It is the job of the directors to manage risk and the eight pages of Carillion’s last annual report devoted to the subject clearly only scratched the surface.

Chairman Philip Green should have spent less time wondering about the long-terms risks from Brexit and more time addressing the upfront and present dangers from cost over-runs on three big jobs: new hospitals in Liverpool and Smethwick plus the Aberdeen bypass. The walk-on role played the auditors, KPMG, will go under the Financial Reporting Council’s microscope in due course. But the hard fact is that Carillion directors were boasting in March last year of having “substantial liquidity with some £1.5bn of available funding” yet the company ran out of money 10 months later.

As usual with the construction sector, the immediate cause of failure is a mix of badly priced contracts, badly managed risks plus too much debt. On a good day, contracting firms run on tight operating margins of 3%. If debt is too high, there is little room to absorb calamitous contracts. When three contracts go sour in quick succession, the numbers can spiral out of control.

In the circumstances, the government had no choice but to let the company go bust. Carillion had six months to organise its own rescue and failed, despite being thrown a few contracts such as work on HS2 to buy breathing space. Besides, a bailout of Carillion would also have been a bailout of the company’s banks and bondholders, who definitely don’t deserve it since they were asleep to the risks as much as the directors. The government has still inherited a fine old mess – and, however much ministers talk up their “contingency” plans, it seems highly likely that costs from Carillion’s failure will rebound on the public purse.

[Denzil_DC]

7. The Scottish Tories sure can pick 'em ...

David Mundell urged to drop Carillion interim chief executive as Scotland Office adviser

SCOTLAND Secretary David Mundell is under pressure after it emerged that the interim chief executive of failed construction giant Carillion is one of his top advisers.

Keith Cochrane CBE, who sat on Carillion's “business integrity” and audit committees before taking temporary charge of the the firm last year, is also the lead non-executive director at the Scotland Office.

The businessman, who spoke out against independence during the referendum, sits on a joint board with Mundell that considers constitutional issues like Brexit.

...

Cochrane, a chartered accountant from Scotland who used to lead the Weir Group, was appointed interim chief executive [of Carillion] in the summer of last year after Richard Howson stood down from the post.

http://www.heraldscotland.com/news/15886349.Revealed__Carillion_boss_helps_Mundell_run_the_Scotland_Office

[Denzil_DC]

8. ... and he's gone

Carillion boss quits controversial Scotland Office role to avoid becoming a "distraction"

THE interim boss of the collapsed outsourcing giant Carillion has stepped aside as an adviser to the Scottish Secretary.

David Mundell told MPs that Keith Cochrane OBE had decided to end his role at the Scotland Office while the firm’s demise was under investigation.

He said Mr Cochrane did not want "to become a distraction".

...

As recently as Saturday the UK Government had insisted: "Mr Cochrane continues in his role with the Scotland Office."

http://www.heraldscotland.com/news/15893825.Carillion_boss_quits_Scotland_Office_role