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Carillion: Decline and fall....

So RIP Carillion, at least for now.  With the ‘What went wrong?’ post-mortem underway – and with it, a great deal of finger-pointing – my immediate concern is for the knock-on effects on Hudson Contract clients.

Suppliers chasing payments from completed works, and those who were working on projects for private sector clients and on 'non-strategic sites’ will lose out.  And I am sorry to say I know already of a few firms owed large sums of money by Carillion that may have no option other than to follow the toppled giant into administration. 

For now, though, Carillion's largest client – the taxpayer – has thrown out a financial safety net to ensure vital projects and services do not come to a grinding halt.   

A message from the Official Receiver says that unless told otherwise, all employees, agents and subcontractors are asked to continue to work as normal, with the promise that they will be paid for the goods and services they supply during the liquidations.

On a personal note, and like so many others, having served as an employee at both Mowlem and McAlpine and therefore by default for Carillion, my pension fund is likely to have taken a hit.  And the McAlpine shares I took as part of my earnings package, which used to be worth about £4.80 each, were converted to Carillion share, making them worthless.  I am in a fortunate position and can shrug off these losses, but I know some of the tens of thousands of former employees will be hit much harder.

Equally, it gives me no pleasure to say that I predicted the end of Carillion at the start of 2017. 

So what did go wrong?

After its split from Tarmac in the late 90s, Carillion grew its profile and power by taking on the 'cost-plus' jobs for Railtrack that nobody else wanted. They have never made money since.

The merger with Mowlem in 2006 was a disaster as Mowlem were carrying huge losses from projects such as Dublin Port Tunnel, and their cashflow was crippled by over-rapid expansion into the services market.  

The aggressive takeover of the successful McApline business a few years later was a huge shame for the industry, but helped Carillion justify another round of exceptional and restructuring costs, hiding the fact that the Mowlem deal had turned sour and they were in fact insolvent.

A number of smaller sales and acquisitions and a monster PR machine kept things ticking along but like a huge Ponzi scheme, it was only ever a matter of time before it failed.

Carillion's last throw of the dice was a takeover bid for Balfour Beatty last year. This would have made the books impossible to scrutinise for many years to come.  Thankfully Balfour's resistance was more successful than McApline's, and Carillion's true position was exposed.

To many of us who worked alongside or for Carillion, they were affectionately known as 'Carry on Construction' run by accountants rather than engineers and QSs.  Sites were hamstrung with so much red tape they could not function as they should.  However, unlike Sid James and the gang, Philip Green and his chums have not left us anything to smile about.

Now the banks and the government have finally switched off Carillion's life support machine, the question has to be asked why they dragged things out for so long. 

Let the inquest begin . . .

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