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Mixed reactions to Carillion report

By John Corser | Business | Published:

The Confederation of British Industry has defended UK business in the wake of the damning report on Wolverhampton-based Carillion from the Work and Pensions and Business Select Committees.

Former Carillion financial director Richard Adam giving evidence

It accused directors of the failed construction and services group of "stuffing their mouths with gold" and said it had a "rotten corporate culture."

CBI Deputy Director-General Josh Hardi said: “The language of the report suggests committee members think business in general is greedy and reckless. This is irresponsible and wholly inaccurate.

“Carillion was a painful lesson for business and government on the dangers of short-termism in public service contracts. This failure should act as a catalyst for a level-headed discussion about how the public and private sectors work together to deliver value to society, as they so often do.

“200,000 organisations play a vital role in delivering public services, providing much-needed innovation and investment - whether through building new classrooms or transforming frontline public services – often in very challenging circumstances.

“Knee-jerk soundbites on Carillon risk locking out innovation and investment at a time when it’s needed most.”

Carillion's former finance director Richard Adam, who was named in the MPs' report as the "architect of Carillion's aggressive accounting policies" and was previously accused of "dumping" shares worth hundreds of thousands of pounds at the first possible moment, said in a statement: "'Despite retiring over a year before Carillion went into insolvency, I am deeply saddened by the events that have since overtaken the company.

"The reasons for the collapse are clearly complex; however, I reject the unwarranted conclusions the committees have reached concerning my role at the company

"I have objected to the committees about quotes that they have misattributed to me. I look forward to contributing to the due process and conclusion of the various investigations that are still ongoing."

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Unite union assistant general secretary Gail Cartmail, picking up the report's summary that Carillion could happen again, and soon, said: "The fall of Carillion was the inevitable outcome of a business model that embodies a 'race to the bottom' on bidding for contracts.

"The public sector can change that. National and local government have the power to transform outsourcing disasters by bringing services in house where profit is no longer the ideological master and for service contracts that are let to apply standards on quality and workforce concerns."

Roger Barker, of the Institute of Directors, said: "The report confirms that, far from being a natural market failure, the demise of Carillion came about as a result of individual failings by the company's board and other actors in the governance chain.

"What makes this all the more painful is that many of those who bore the brunt of its collapse – its employees, suppliers and other stakeholders– were among those who helped keep company on its feet for as long as it did.

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"Carillion's collapse undermined the already low level of public trust in business. The majority of UK businesses and business leaders bear little relation to the companies we have seen fail due to poor corporate governance in recent years, yet unfortunately they are tarnished by the same brush."

Rail, Maritime and Transport union general secretary Mick Cash said the "bombshell report" rammed another nail in the coffin of the racket of outsourcing and franchising.

"The Carillion business model didn't disappear with the collapse of the company and is still prevalent from train cleaning to rail franchising. It's time for that whole rotten culture of corporate greed to be swept away for good," he added.

The chief executive of the Institute of Chartered Accountants has warned the profession may not exist in 20 years if failures highlighted by the Carillion collapse are not addressed.

Michael Izza said a damning parliamentary report into the engineering giant's demise shines a light on a "sorry corporate failure".

The Federation of Masters Builders said the Government must learn from Carillion by enforcing fair payment and opening up public sector contracts to smaller firms.

Brian Berry, chief executive of the FMB, said: “It’s the small firms in Carillion’s supply chain that bore the brunt of the giant’s demise earlier this year. The Government now has a unique opportunity to completely change how it works with the private sector. For too long, many large firms have reigned supreme and walked all over their supply chains.

"MPs are right to note that 'measures that Government has taken to improve the business environment, such as the Prompt Payment Code, have proved wholly ineffective.' As a signatory of the Government’s Prompt Payment Code, Carillion should have paid 95 per cent of invoices within 60 days. However, Carillion enforced standard payment terms of 120 days to its suppliers and we know of FMB members that have had to wait for more than 200 days to be paid by major contractors. A company that was so flagrantly breaking the rules should not have been rewarded by the Government with juicy contract after juicy contract.”

Mr Berry said the collapse of Carillion created a ‘domino effect’ among sub-contractors.

"We know of firms that have lost more than £200,000 since the collapse and of others that were so reliant on Carillion contracts, they’ve gone out of business entirely," he added,

West Midlands Mayor Andy Street paid tribute to the work of regional partners in the aftermath of Carilion's collapse at the end of January.

"The region’s reaction to the collapse of Carillion demonstrated how teamwork and a co-ordinated response could help support the businesses and individuals affected.

“The formation of a taskforce – led by the Black Country Chamber – meant within 24 hours a helpline was set up to help businesses by putting them in touch with the right help.

“It also meant we were able to start matching people who had lost their jobs with openings – I know 12 Black Country Chamber members contacted the taskforce to offer opportunities.

“And by working with CITB, we’ve successfully got most of the local apprentices – numbering around 200 - back into postings. We continue to work with the small number who remain.

“Nobody is understating the impact of the collapse but I believe local partners – including WMCA, Wolverhampton Council, Black Country Chamber of Commerce, Black Country LEP, Black Country Growth Hub, DWP and BEIS – deserve huge credit for their work in the aftermath.

“Our ongoing concern is to get work back underway at the Midland Metropolitan Hospital and we remain in discussions with Government to ensure things get moving as quickly as possible.”

John Corser

By John Corser
Business Reporter - @JohnCorser_Star

Express & Star business reporter at head office, Wolverhampton. Welcomes all news of companies and business organisations.

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