Lessons to be learned from Carillion collapse

Cabinet ministers have concluded a crisis meeting about keeping vital public services going after the collapse of contractor Carillion.

The construction giant, which provides services for schools, prisons and hospitals, has gone into liquidation.

Cabinet Office minister David Lidington said the two-hour Cobra committee talks enabled ministers to air any concerns.

Carillion ran into trouble after losing money on big public sector contracts and running up huge debts of around £1.5bn.

The government is stepping in to pay employees and small businesses working on Carillion’s public contracts and assess the distribution of contracts among other companies.

Carillion, the UK’s second biggest construction firm, was also involved in major projects such as the HS2 high-speed rail line.

The firm has 450 government contracts, including maintenance for prisons and hospitals, as well as dinners and cleaning for hundreds of schools.

It is also the second biggest supplier of maintenance services to Network Rail, and it maintains 50,000 homes for the Ministry of Defence.

Carillion has 43,000 staff worldwide, including 20,000 in the UK.

According to the Federation of Master Builders (FMB) the Government must learn from Carillion’s demise and assess its over-reliance on major contractors. Brian Berry, Chief Executive of the FMB said:

“Carillion’s liquidation is terrible news for all those who work for the company and it will have serious knock-on effects for the many smaller firms in its supply chain, some of which will be in serious financial danger as a result of Carillion’s demise.”

Berry concluded: “Carillion’s liquidation raises serious questions for the Government, not least about its over-reliance on major contractors. The Government needs to open up public sector construction contracts to small and micro firms by breaking larger contracts down into smaller lots. That way, it can spread its risk while also reaping the benefits that come from procuring a greater proportion of its work from a broad range of small companies. Construction SMEs train two-thirds of all apprentices and are a sure-fire way of spreading economic growth more evenly throughout the UK.”