It is 12 months to the day since Carillion entered liquidation, which saw 20,000 jobs lost and the pensions of nearly 30,000 staff and former employees compromised. And ever since, the search for “the next Carillion” has captivated the imaginations of the nation.
“Why? And “How?” may have been the questions that industry leaders, politicians and the general public have been asking the loudest, but what they all really want to know is “Who’s next?”
When it was liquidated with debts of £1.5bn in January 2018, Carillion had 420 UK public sector contracts on its books.
Investigations have since been launched, fingers have been pointed and senior officials and auditors have been accused of covering up the mess. Unite the Union has now called for a criminal investigation to be launched to hold those responsible to account.
So far no action has been taken against Carillion’s directors, with investigations by the regulator into accountants and auditors, the Financial Reporting Council and the Insolvency Service. Meanwhile, the government’s pension regulator has yet to implement any recommendations from its investigation after Carillion left an £800M shortfall leaving thousands of employees short.
The government has also been slammed for its part in continuing to dish out work to the contractor despite repeated profit warnings in the months leading up to last year’s collapse. The Cabinet Office has however introduced a living will system for outsourcers to follow in the event of a business failure.
The collapse of Carillion also thrust the issue of late payments into the spotlight, with Carillion owing around £2bn to 30,000 suppliers when it failed.
But the post-mortem of Carillion’s collapse pails into insignificance compared to the search for “the next Carillion”.
It didn’t take long for the “search” to capture the imaginations of national newspapers, investors and the public alike, with few contractors escaping the sceptical glare of all and sundry.
Kier, Interserve and most recently Laing O’Rourke have all had to defend their balance sheets and convince hedge fund managers and investors to keep the faith.
After investors brought an end to months of short selling on Kier last week, the firm is set for another rocky patch with the news that shareholders are pushing for the board to be ousted.
Sky News reported that Woodford Investment Management – which holds a 16% stake in Kier – is among a group of investors questioning the future of chief executive Haydn Mursell and finance director Bev Dew.
The year has also begun on uncertain ground for Laing O’Rourke. Last week, the firm finally agreed refinancing terms with its lenders after delays forced the company to postpone the publishing of its accounts for the last financial year by three months.
After months of negotiations, the Crossrail and Hinkley Point C builder has now agreed new bank loans not due for repayment until 2022. The refinancing package gives the company breathing space after the company lost £66.9m in its last full-year accounts published for year ending 31 March 2017.
Likewise, Galliford Try hit hard as Carillion’s AWPR JV contractor and Skanska cut 3,000 jobs worldwide in 2018, while Lagan Construction announced it would be putting four of its divisions into administration.
“There is also more the construction industry can do to safeguard itself in 2019,” Scape Group chief executive Mark Robinson said. “The collapse of Carillion last year exposed the very real vulnerability of the supply chain. With Brexit on the horizon, it’s vital that we look after suppliers and ensure we are fostering a system that supports SMEs and encourages innovation,”
“The government must also address the issue of access to essential EU construction workers. The recently published Immigration White Paper is unsettling for the industry and it needs to be amended to ensure access to European construction workers following the 29 March. If we get this wrong – all the business optimism in the world won’t make a difference, as we won’t have the manpower to deliver new homes and essential infrastructure projects.”
With the real possibility of a no-deal Brexit to come, 2019 could finally give the vultures their next high-profile casualty.
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