Sneaky government statement reveals lack of action on Carillion

I receive regular updates from Construction News and felt this editorial was woth sharing:

The Carillion story so far… Liquidated with debts of more than £7bn. ‘Catastrophic losses’ passed on to 30,000 subcontractors. Stalled work on more than a £1bn-worth of major projects. And an estimated £200m cost to the taxpayer. MPs on the inquiry into the liquidation recommend an overhaul of the regulatory tools that let this happen, and suggest throwing the book at those responsible. The government’s response… A nine-page document published at 4:30pm on a sweltering Friday afternoon. This was the definition of sneaking something out. As if attempting to bury its response on the eve of the school holidays wasn’t shameful enough, the content was scant and was effective only in passing all responsibility to the regulators. For example, on the topic of director liability and punishment for failure, the government said the Financial Reporting Council, Insolvency Service and Financial Conduct Authority were working “to improve their current practices”. On the committee’s recommendation that it should beef up the FRC’s powers, the government’s response was that a memorandum of understanding had been agreed between the three regulators. But perhaps this should come as no surprise. Our leaders in Whitehall were all too happy to offer bold statements about Carillion and how its failure exposed poor corporate governance and inadequate accountancy checks. But when it comes to action? Well, apparently that’s for the financial watchdogs. It’s unlikely that the £16.8m in wages that Carillion directors pocketed will ever be recovered, although the government has the power to do so. But at the very least it could make an effort to stop another such fiasco happening again. What Carillion exposed was that there is barely anything to stop executives of failing construction firms paying themselves huge bonuses. Nor are there sufficient deterrents to the use of accountancy tricks to obscure huge debts – often affecting thousands of suppliers. The government seems happy to close its eyes and hope nothing like this happens again. It makes you think: what would it take for them to actually take action? Another Carillion? Another four Carillions? On the evidence of Friday’s response, you could have a hundred Carillions and the politicians would still refer you to the FRC.  Zak Garner-Purkis, news editor, Construction News

Barnet Unison seek job security for council Capita staff and call for services to be brought in-house

From Barnet Unison LINK

 This morning Capita staff woke up to some scary headlines that the former FTSE 100 company was in serious trouble.

The next Carillion? Shares in outsourcing firm Capita plunged 40% after profit warning LINK.

Outsourcing giant Capita announced the suspension of its dividend as part of a transformation plan this morning – and shares duly plunged by more than 40 per cent LINK.

This news follows on from the recent collapse of Carillion only a couple of weeks ago. Already political commentators are making comparisons with Carillion and Capita.

In light of the much publicised stress and anxiety experienced by Carillion workers in the wake of the company’s downfall; Barnet UNISON has written to the Chief Executive seeking details of Barnet Council’s contingency plan in the event Capita may have to give up their contracts.

We know that whatever happens there is going to be a great deal of speculation and uncertainty for the staff and whilst UNISON has seen the email from Jon Lewis, Capita’s, new Chief Executive trying to stem anxieties of his 70,000 workforce, we know workers will be worried about their jobs.
Barnet UNISON is looking for a statement from the Council in the event that Capita are unable to continue to run the two Barnet contracts, that Council will initiate plans to transfer the staff back in-house.

Who can we trust?

Since the collapse of Carillion, more news has emerged as to how bad things really were for that company. Furthermore questions are being asked about the role of the external auditors KPMG more here LINK
 
It has happened before in Barnet…… 

In 2010 Barnet Homes had commissioned Connaught’s to provide Council Housing Repairs service. Connaught’s went into liquidation. Our members were told they had lost their jobs over a message on a speaker phone. Months earlier Barnet UNISON had held talks with Barnet Homes Chief Executive as it was becoming increasing clear Connaught’s were in serious trouble. There was further problems when it became clear that there was missing pension contributions which needed to be picked up by Barnet Council.

Read more HERE

Footnote: On 26 June 2017 Capita share price was 705.50 now six months later the share price closed today at 202.09 which represents a 72% drop in their share price over a six month period.

On Wednesday 31 January, 2018 the Capita share price opened up at 347 and closed at 182.50 which represents a 47.53% fall in share price.

John Burgess, Branch Secretary of Barnet  Unison said:

Once again the market shows that it is merciless when a company is in trouble. Carillion looks as if it is just the tip of the iceberg. The minute Carillion collapsed I immediately started to look more closely at Capita Share price. I noted that Capita share price had already dropped by around 66% in the last two years. Today seems to have shocked many experts. My concern is for the staff and the local services they provide for Barnet residents. I know from speaking to staff that they are worried and quite understandably cynical about any messages trying to play down what is happening to the company. After the debacle that our former Connaught members went through previously I want to ensure this time that Barnet UNISON does it utmost to try to allay members concerns about their future employment. My view is that this event is a watershed moment for Barnet Council. Please abandon your “love affair” with outsourcing and commence negotiations to return all services back to the Council.

Quintain foresaw Carillion collapse last summer

On January 15th LINK I reported that Quintain had confirmed that Carillion were not active in its Wembley Park development and that the company had decided in September not to go ahead and award them the South West Lands contract which would have been worth £130m.

I remarked that Quintain  

--> appear to have been more canny than the government following Carillion's  profit warnings in July 2017. This has now been confirmed by Quintain's executive director of construction, Max Voyce, in a statement to Construction News LINK:
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Quintain take the financial strength of our contractors and wider supply chain very seriously and during negotiations for a build-to-rent development at Wembley Park, Carillion issued their first profit warning.

We were concerned that the level of loss declared, along with the huge pension deficit, would seriously impact Carillion’s ability to continue to trade and garner the support of the supply chain, increasing the likelihood that our cost and programme objectives would not be met.

We therefore took the view that we would not proceed into contract upon the completion of Carillion’s precontract commission and commenced discussions with McAleer & Rushe, whom we have now successfully contracted with.

Quintain confirm Carillion 'not active' in Wembley Park

Quintain said today that it was decided in September 2017 not to award the contract for South West Lands to Carillion, the company that went into liquidation earlier today.  Quintain appear to have been more canny than the government following company profit warnings in July 2017.

Quintain said that Carillion are not active in Wembley Park.

Greens call for cancellation of HS2 in the wake of the Carillion collapse

The Green Party has called on the Government to cancel HS2 after the collapse of Carillion, the company building the high speed rail link.

Jonathan Bartley, Green Party co-leader, also urged the Government to reverse privatisation, bring contracts back in house and launch a full-scale inquiry into the decisions made about the company, and the wider “privatisation experiment”.

Bartley said:

The collapse of Carillion should be the final nail in HS2’s coffin. Cancelling this vanity project would save tens of billions of pounds, and stop the environmental vandalism which would see miles of countryside and ancient woodland covered in concrete. Instead, Britain's rail network has the opportunity to rise like a phoenix from Carillion’s flames. Thousands of jobs could be created by investing instead in the upgrades local rail networks desperately need.

Carillion's demise should be seen as an opportunity to reverse privatisation, and protect jobs and pensions by bringing contracts back in house. It should also be the trigger for a full-scale inquiry, not just into the reckless decisions this Government has made over Carillion but also the whole privatisation experiment, which has been tried and found consistently wanting.