Too Big to Fail?
It seems not in the case of construction and outsourcing giant Carillion, which has gone into liquidation this week. With no Government bailout, nor even an attempt to sell the business through administration proceedings, the fallout is likely to be significant. What went wrong? In a largely commoditised monopolist industry run on tight margins, cash is king and the impact of project delays and cost inflation can be severe. Subcontractors have been vocal about Carillion’s extended payment terms, and this maybe should have been an early warning sign – that and three profit warnings. Corbyn has used the collapse to call for an end to PFI deals. This doesn’t feel like the answer. However, the review to come will doubtless address issues about how large public contracts are procured, putting all of the public eggs into relatively few large baskets, and the focus on winning new revenue streams at the expense of sustainable profits.