Nov 202020

Carillion is perhaps British capitalism’s most embarrassing failure. Over the decades, there have been costlier corporate collapses, such as Royal Bank of Scotland, and more shocking ones, such as Northern Rock. There have been company deaths that tug more at the heartstrings — MG Rover, or Woolworths — and there have been more colourful and dramatic ones — Maxwell, Barings and Polly Peck. But for sheer shame to the business establishment, the Carillion implosion might take the crown. For the scale of “blunder and plunder”, as Bob Wylie puts it in a new analysis of the collapse, Bandit Capitalism, the downfall of the construction and facilities management group has few equals.

This was a company so mismanaged and pillaged that by the end it had £7 billion of liabilities but only £27 million of assets. There was no point in putting it into administration so it went straight to the knacker’s yard in January 2018.

This was an episode where none of capitalism’s supposed checks, balances and safeguards worked. Regulators, auditors, Whitehall officials and the company’s “independent” directors all failed to prevent what Wylie likens to a gigantic Ponzi scheme. The mystery was not that it failed but that it lasted so long — this was the verdict of a scathing parliamentary report.

Forty-three thousand employees had their jobs threatened; about 28,000 pension fund members were denied their full promised pensions; 30,000 suppliers, subcontractors and other creditors were never fully paid; there was huge disruption to public projects; and taxpayers had to step in to keep essential services going. Oh, and the shareholders were wiped out.

Two years and ten months after the burial, the first official response has been disclosed. On Friday the Financial Conduct Authority said that it had issued warning notices against “certain executive directors” and was proposing a public censure against the company. According to the watchdog, the executives acted recklessly and misleadingly in three over-optimistic trading statements in the year to July 2017, which concealed how badly Carillion was doing.

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The Times

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