Leader: A hell of a mess

It’s going to take months for the enormity and impact of Carillion’s corporate failure to be fully assessed. The last time a huge household name landed itself in this kind of trouble, Ray O’Rourke swaggered into town with some loose change in his pocket and acquired Laing for a pound. Though the roots of this latest soap opera are grounded in complex PFI accounting, and the scenario is more akin to the demise of Jarvis – remember them? 

When Laing Construction failed, the consequences for its employees and the wider market were profound, and we’re all waiting to see how bad it will be with Carillion. As we go to press, accountants, financiers, risk specialists, insurers and other clever folk are trying to weigh the failed company’s liabilities against the scale of its problem contracts. It’s an impossible calculation, given the complexity and scale of its work across the public, private and international sectors, with its thousands of partners and long-suffering supply chain. A course of action will eventually be set, but whether that will mean selling off bits of the firm, shunting its contracts or closing down failing parts of the business, the work of mapping the mess has to happen first. 

And then there is you. You’ve just got to work out whether all this is a threat to you or an opportunity.

At the same time, the inquest is launching, as the Financial Conduct Authority sharpens its pencil to plot Carillon’s communications versus its corporate activity, scheduling interviews with current and former advisors including its former management, who look set to be publicly held to account. So you can expect no stone to be left unturned – and it won’t be pretty. 

And then there is you. You’ve just got to work out whether all this is a threat to you or an opportunity. But for now, let’s look at the injury list as well as those quietly assessing whether there are any rich pickings:

First, the management team. What will happen to CEO-in-waiting Andrew Davies? Will Wates welcome him back home? Will he look to lead a phoenix-from-the-flames operation? Or quit the industry altogether? Meanwhile, former CEO Richard Howson, currently being splattered all over the tabloids, will be wondering what his next move is. Across Carillion divisions, senior folk are quietly polishing off their CVs. 

Carillion staff. The company’s collapse will, of course, be hugely unsettling for people with mortgages to pay. But chronic skills shortages in key areas such as quantity surveying, engineering and at the coalface will see key work winners and delivery people snapped up quickly. Then the masses will need certainty – and quickly – or the fallout will only get worse.

In the longer term, the government’s relationship with Carillion will be difficult to unpick

Clients. There’s a stack of clients already suffering. It’s why we’re in this mess in the first place. Lawyers will be winning. All Carillion’s clients will be running the rule over their contracts, enacting risk management and mitigating plans, assessing their cost parameters and lining up replacement firms immediately. 

Meanwhile, the government in its role as both a client and a regulator will be considering its options. In the short term, ministers will not want large-scale job losses. But in the longer term, the government’s relationship with Carillion will be difficult to unpick. First, to assess fully its use of the firm, from framework agreement to one-off contracts, and then, to do what the public is shouting for: work out what went wrong and how to avoid it in future. One thing’s for sure: procurement in this sector is going to change fundamentally.  

And talking of contractor replacements, Carillion’s rival contractors, quiet right now, are waiting to pounce. It’s unlikely Ray will snap up Carillion for a pound, although you never know. But the City will, no doubt, be eyeing takeover options.

Then, finally and importantly, there’s the plight of the people and companies at the coalface. The poor suppliers and subcontractors doing Carillion’s work. Right now, they are assessing and re-assessing their risks, payments, debtor books, taking calls from their own suppliers and considering how many staff they will need to lay off. And they are also wondering, during sleepless nights, whether their firms will fall victim to the government and the financiers’ failure so far to sort out this mess.

Thousands of jobs, thousands of businesses and thousands of people’s livelihoods are on the line. It’s time for the financial and government team picking over Carillion’s corpse to step up and find fair and practical ways to safeguard the supply chain and the many thousands of Carillion employees on the brink. They need to do this or face economic and social consequences that are likely to be absolutely dire. If ever there has been a time when leadership of the construction industry and its unity with the government is to be tested, this is it. The end of Carillion’s story has only just begun.