By Simon Basketter
Downloading PDF. Please wait... Issue 2587

As Carillion fat cats demand more state cash – stop outsourcing to save jobs

This article is over 6 years, 1 months old
Issue 2587
Cleaners employed by Carillion protesting in London in 2012
Cleaners employed by Carillion protesting in London in 2012 (Pic: Guy Smallman)

Bosses at Carillion have got their hands out. They have already taken billions of public money on the outsourcing and privatising gravy train.

Now the crisis-hit construction firm has called on the government to step in with cash for a string of failed projects around the country.

It has refused to name the bungled contracts it wants the government to bail out. But problems with building the £350 million Midland Metropolitan Hospital in Smethwick, expensive delays constructing the £335 million Royal Liverpool Hospital and a £550 million stretch of the Aberdeen bypass, are all in serious trouble.

Carillion is Britain’s second-largest construction company, employing 43,000 people globally. It is one of the largest suppliers of services to the public sector and has control of some of the largest government contracts here.

It maintains 50,000 homes for the Ministry of Defence, manages nearly 900 schools, runs half of England’s prisons and is heavily involved in transport infrastructure.

The company was formed through a series of takeovers of Tarmac Construction, George Wimpey, Mowlem and Alfred McAlpine. It was one of many that blacklisted trade unionists in the construction industry.

Carillion been one of the go-to firms for outsourcing and privatisation, first with New Labour and now with the Tories. The Carillion group already receives more than £1 billion of public money in government contracts each year.

Tim Sanders on Carillion

Despite the lucrative income from the state,ithas debts of more than £900 million and a £600 million hole in its pension fund.

A coalition of banks, bondholders, suppliers and other creditors has been assembled and is demanding cash. The jobs and pensions of the nearly 20,000 workers employed in Britain are at the bottom of the list.

An anonymous accountant in the company said, “It’s about resetting some of the big contracts and making them less lossmaking.”


In other words Carillion can convert some of its debts into shares to give to bankers. They call this a credit for equity swap. If that doesn’t happen they say the company will go into administration – bankrupt.

A 50-strong team from vulture accountants PwC has been drafted in to oversee the collapse.

Carillion’s share price plummeted by 93 percent in 2017. Its shares hit an all-time low last Friday of 14.2p.

Just a week after a profit warning in July, the government named Carillion as one of the winners of £6.6 billion worth of contracts to deliver part of the new HS2 rail line. Transport secretary Chris Grayling defended the decision, saying the government had received “secure undertakings” that the contracts would be delivered.

In November following another profit warning, the beleaguered firm bagged two contracts with Network Rail worth £320 million.

Carillion’s former boss Richard Howson, who left last September, received more than £6 million in pay and bonuses since taking over as chief executive in 2012.

He will continue to receive his £660,000 basic salary plus £28,000 worth of perks until his notice period expires at the end of October. As late as 2016 he earned £1.51 million, including a £245,000 bonus in cash and shares and a £231,000 pension contribution.

Administration, followed by a fire sale of assets, may beckon. This would trigger tens of thousands of job losses and leave public sector projects in disarray.

But the solution is not to throw more cash at the privatisers. It is to protect jobs by taking all the projects in house and giving no more money to the bankers.

Sign up for our daily email update ‘Breakfast in Red’

Latest News

Make a donation to Socialist Worker

Help fund the resistance