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Speaking selfishly, it's extremely bad news for Wolverhampton. Carillion is our biggest company (the Black Country's biggest company in fact) and has a huge presence in the city. At least Tarmac split from them I suppose so one half is safe for now.

As far as less competition is concerned, when they were doing well they were considering buying Balfour Beatty anyway, so the two have cancelled each other out there...
 

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Seemingly going bust, so what effect on the road, rail and infra of the UK?
Cost rises due to less competition???
Carillon are the worst in rent seeking opportunists. Instead of the government managing major infrastructure projects like they should, they fob them off to the lowest bidder (i.e., Carillion) without proper due diligence. They in turn subcontract to other construction industry businesses.

The only thing that has mattered to governments of both political persuasions when involving the private sector in projects is price. The quality of the tender, its affordability and how it will be delivered are not seriously appraised. It's the same problem which has afflicted the care sector, and caused major issues with the East and West Coast rail franchises. It is a major factor in £billions of overpayments for early PFI schemes. Gross incompetence at its worst. To make matters worse, the government signed construction contracts for HS2 with Carillion in full knowledge that they were in financial difficulty.

The other issue is with subcontractors, many of whom supply goods and services on credit. If Carillion go under, so will many jobs and businesses along the supply chain. It is a scandal which I suspect the government will avoid by bailing them out, something equally scandalous given they paid a dividend to shareholders as recently as last year. It's the banks all over again. A bailout would mean privatising profits and socialising losses. Corporate socialism at its worst.

Running a company in this manner should be criminal. Instead, our governments reward such behaviour. We should bring macro project management back into public ownership. This whole public ownership = bad, private sector = good dichotomy is thoroughly debunked.
 

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I expect a lot of construction workers only found out about carillon yesterday in the headlines -I only started researching after someone mentioned there problems in a thread last month -and I have been telling anyone I can.
I expect job losses in the short term and other contractors to pick up the pieces -but I expect it to be difficult on a started project ? luckily I’m not on one of there jobs at the moment.
 

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Not good news for workers but good for taxpayers.

Carillion has clearly been irresponsible and haven't acted appropriately, namely issuing dividends after a profit warning and knowing full well this was coming.
Yup. Very much torn on this one. Bailing them out would further entrench a moral hazard which seems prevalent in British corporate life. You should not be able to run a business irresponsibly knowing that the government will bail you out if you feck things up. By the same token, I feel super bad for all of the workers who are going to lose their jobs, and construction companies that are likely to go out of business. They are innocent parties.

The only silver lining I can see is that it might give the government some leverage to renegotiate some of the worst PFI agreements that they have with the company. I can't find any information regarding the total value of PFI's Carillion hold, but their website suggests that they have an interest in over 20 PFI consortia nationwide:

https://www.carillionplc.com/solutions/services/public-private-partnerships/spc-information/

However, given the track record and free market dogma of the current administration, I doubt that there will be much in the way of PFI renegotiation. Shame really.
 

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Presumably the PFI contracts will be assets sold on by the administrator.
If they go into administration then you are probably correct. There are a few caveats though. For example, if insolvency means the company is unable to fulfil its contractual obligations under the PFI, this might give scope for the government to terminate contracts (or at least extract concessions). There could also be break clauses related to insolvency.

If they don't enter administration - and continue to seek some sort of support from the taxpayer - then there might also be opportunity to extract maximum leverage. It would scandalous for the taxpayer to support this company while at the same time paying them for over the odds PFI contracts!
 

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So...if they're in liquidation, does that make their contracts assets that can be liquidated to pay their creditors? From what I've been reading they only have assets of plant and machinery of about £144m, and the pension shortfall liabilities alone are over £580m...

Carillion has debt and liabilities of £1.5bn pounds with creditors that include banks RBS, Santander UK, HSBC and others. It has a pension deficit, included within that figure, of £580ms.
In terms of assets Carillion based on its 2016 accounts has tangible plant and machinery of £144m, a fraction of its overall debts, not to mention the £800m pensions liabilities.
 

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Interesting tidbit from the BBC:
Damned if they did, damned if they didn't?

The government refused to insure Carillion's debts, so the banks pulled the plug. If it had offered guarantees to big banks on behalf of a private company it might have been accused of nationalising losses while privatising profits.

The whole point of having private companies do public work is that they shoulder some of the risk. The truth is the government has been helping out Carillion for a while. Awarding it contracts when it knew it was in trouble raised eyebrows last year.

The government constructed the HS2 contracts so that Carillion's joint venture partners would take on the work if the company went bust - meanwhile it hoped the new contracts would be enough to make Carillion's lenders feel reassured.

Industry sources tell me that if the company hadn't been awarded new government work it would have been curtains for Carillion months ago.
http://www.bbc.co.uk/news/business-42687032
 

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The BBC is a bit wide of the mark saying the government 'helped them out' by awarding construction contracts. I'm sure the contracts were won by Carillion after tendering the lowest price bids.

You could argue the government should have disbarred the company after the first warnings, but that could have led to legal challenges, so it probably wasn't even an option.
 

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Carillion being in dire straits would be like Capita getting in financial trouble. The amount of government contracts to Carillion is staggering. The fact that they are losing money hand-over-fist is simply a result of people taking as much out of the company as they can.

Why? because the taxpayer foots the bill for any poorly managed government supplier.

Capita for example has a policy of buying up all companies who have government contracts. It's essentially free money that execs are just taking out and putting in their back pockets.

If you keep outsourcing all your decisions, ultimately it will come back to bite you, but if you're a government supplier it doesn't matter because execs will still get all their dividends and bonuses, the employees will get their contracts bought out by the next supplier and the merry-go-round will begin again.

what a shit show, G4S seem to still be doing OK, as are Serco.......
 

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Carilion

I would be interested to see how many politicians are substantial shareholders in the company. One of the NEDs is Baroness Sally Morgan (a labour peer) and one chairman of Segro pensions and another a trustee of Tesco pensions. These people need to be held to account in not carrying out their statuatory duty especially where it is in direct conflict with their other roles.How can a NED with pension expertise oversee such a huge pension deficit?
 

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I would be interested to see how many politicians are substantial shareholders in the company. One of the NEDs is Baroness Sally Morgan (a labour peer) and one chairman of Segro pensions and another a trustee of Tesco pensions. These people need to be held to account in not carrying out their statuatory duty especially where it is in direct conflict with their other roles.How can a NED with pension expertise oversee such a huge pension deficit?
my thoughts exactly, probably obfuscated through some elaborate chain of companies to hide away any conflict of interests
 

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Discussion Starter · #17 ·
Interserve also now seem to be in trouble with the banks and issuing profits warnings.

Would it be fair to say that these companies are bidding low for public sector work on the hope of selling add-ons once the contract has been awarded, however, the state is managing this very well and not over paying?

The fact that these companies are unable to make money suggests to me that the future involves more expensive procurement from the state, be it through the private or public sector.
 
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