The calm after the storm: How Carillion's collapse is still being felt in the West Midlands
A year after the collapse of outsourcing giant Carillion the impact of its demise is still being felt across the West Midlands.
Just this week plant hire business Hawk, which suffered disruption to contracts as a result of Carillion’s fall from grace, entered administration, with the initial loss of 83 jobs.
In Smethwick the Midland Metropolitan Hospital was stalled for nine months after Carillion entered liquidation January 15, 2018. The project is still not back on track with the eventual opening now back to 2022.
Many firms across the country are still suffering from the collapse of the construction and outsourcing giant, but it also emerged this week that £100 million of financing made available for small and medium-sized firms in the wake of Carillion’s collapse remains untouched a year on. It was made available by the Government-owned British Business Bank on February 3.
The funding, an expansion of the bank’s Enterprise Finance Guarantee programme, was meant to enable high street lenders to offer finance to small businesses that were affected by the liquidation and lacked the security to get a conventional loan.
The British Business Bank has admitted that no lenders had needed to use the fund and said the £100m was never meant as finance for distressed companies and was administered along the same lines as the existing EFG.
The key Carillion contracts
There were 57 contracts being run by Carillion when it went into compulsory liquidation on January 15 last year:
The HS2 contract
Worth £1.3 billion, the contracts included tunnels through the Chiltern Hills as part of a consortium. Kier took on 51 Carillion employees to deliver this as part of a 50/50 joint venture with Eiffage. Kier also took over Highways England smart motorways work Carillion was to deliver and 149 sfaff from that.
Midland Metropolitan Hospital, Smethwick
The £475 million super hospital was stalled for nine months. Work is only now getting back on track with a final contractor to be appointed.
Royal Liverpool University Hospital
Laing O’Rourke was confirmed in October as management contractor on the £335 million project.
Ministry of Defence’s Northwood headquarters, Hertfordshire
£196 million facilities management contract awarded to Skanska until 2031 including buildings and grounds maintenance.
One Chamberlain Square
Part of the £700 million Paradise project in Birmingham. BAM Construction took over as main contractor for the office building in March. It is due to be handed over to PwC.
None of its former employees now remain in the former Carillion headquarters in Salop Street, Wolverhampton – pictured above – from which liquidators faced a tough battle to save as many jobs as they could across its massive UK operation.
The Insolvency Service said Carillion had 18,257 direct employees in the UK with 13,945 of those eventually transferred to new suppliers.
But that meant there were 3,038 redundancies, and 1,274 more employees left the business during the liquidation, whether it was because they found new work or simply retired.
Government outsourcers are still reporting growing debt levels. Kier Group, Interserve, Serco, Sodexo and Sopra Steria, who are all on the Government’s list of strategic suppliers for 2019, have taken on hundreds of millions of pounds worth of debt in the last three years.
Another trade union has this week stepped up calls for a criminal investigation into the collapse of Carillion. Unite says the Government has not taken enough action to ensure there is not another “corporate meltdown.”
It puts the cost to the taxpayer at more than £150 million, including redundancy pay and “lucrative” work for accountants.
But despite the lessons of Carillion, outsourcing contracts let by the public sector are still on the increase.
The GMB union said the value of outsourcing contracts had increased by 53 per cent over the past year.
It has launched a campaign, marking the first anniversary of Carillion’s fall, calling for an end to outsourcing and privatisation of public services.
'Hell bent on privatisation'
GMB national officer Rehana Azam said: “Despite the tragic fiasco of Carillion, the Government hasn’t learned its lesson.
“The Conservatives are hell bent on privatisation and outsourcing our public services, regardless of the consequences.
“What other explanation can there be for this huge increase on outsourced contracts in the year Carillion went bust and when other outsourcing giants look like they’re on life support?
“GMB believes the disastrous project to fragment our public services for private profit has had its day and we have launched our Go Public campaign to push for an end to outsourcing and privatisation in UK public services.”
A Government spokeswoman said: “These figures are flawed and include the total value of multi-year contracts as annual spend. The reality is that Government spending on outsourcing remains in line with recent years.
“This Government has taken great strides to improve how we work with the private sector, including requiring companies to demonstrate prompt payment to suppliers and piloting ‘living wills’ for critical contracts, allowing contingency plans to be quickly put into place if needed.”
The Electrical Contractors’ Association said many small and medium-sized enterprises were still feeling the impact of not being paid because of Carillion’s collapse.
ECA business director Rob Driscoll said: “Stopping payment abuse at source is critical to UK productivity and growth, and Government should urgently back legislative reform to eliminate the abuse of SMEs.”
Mike Cherry, chairman of the Federation of Small Businesses, said: “The collapse of Carillion was a watershed moment that brutally exposed the shocking ways that some big businesses treat their suppliers.
“The construction giant used its dominant position to squeeze smaller firms with late payments and unreasonable payment terms in an attempt to shore up its own position.
“These practices did not save them and their failure has resulted in very real human consequences. Many small businesses were left with nothing for the hard work they had undertaken beforehand and given nothing in compensation after. Some didn’t survive.
“A year on, we have seen the Government be proactive in attempting to improve public procurement and stamp out poor payment practices.
“Recent reforms to crack down on public sector suppliers that don’t pay on time are welcome and send a clear message that paying late is not okay.
“However, more must be done to ensure private, as well as public sector, supply chains pay on time.”