Carillion, one of the UK’s largest construction companies has been pleased into liquidation by its creditors. The costs to taxpayers and creditors will be huge. The company has been a close partner to the UK government, and has won many huge contracts for big public infrastructure projects.
In the end, the government decided not to support Carillion by granting gurantees to cover over €1 billion in liabilities. The banks and other creditors are now left to suffer these losses which is the correct approach. Nobody forced the banks to lend money to the company!
However, the government, (in other words taxpayers), is left carrying the pension deficit of €600 million, the costs of employing hundreds of accountants, lawyers and other advisors to sort out the mess to all of their projects, and the costs of refinancing existing projects and contractors, many of whom are in the middle of these projects as sub-contractors to Carillion.
The final costs will certainly be nearer €1 billion after the dust has settled, a process that will take more than one year to be finalised!
Many workers will lose their jobs and projects will suffer delays before they wheels start to turn again, thus further increasing costs to the government.
The big question to be asked is why the British government kept on giving new business right up until the end of 2017 when it was well-known that Carillion was in terrible financial shape?
The Conservative government has a lot to answer for given the size and length of the construction and PPP contracts that were awarded to Carillon.
Heads should role – but we all know that politicians, especially Conservative politicians, seem to take no responsibility for bad actions.
The recent decisions to release private companies close to the Party from onerous railway contracts (Virgin Rail and Stagecoach) are examples of other poor decisions that should not have been made – they are expected to cost the government over €2 billion.
As stated in previous columns in FinnishNews, the Finnish government, in particular, the Ministry of Transport, continues to plan for private operators to run a one of more of our public railways and they appear to ignore the fact that the main contractor for ground services at Helsinki’s main airport is also facing severe financial challenges.
Ministers have a duty of care to ensure that contractors are strong and stable at all times.