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Carillion’s collapse puts thousands of workers’ jobs and pensions at risk

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As the outsourcing firm hits the rocks workers must not be made to pay the price, argues Simon Basketter
Issue 2587


Carillion workers on the Canal Tunnels project in London in 2013 - one of many projects handed to the firm
Carillion workers on the Canal Tunnels project in London in 2013 – one of many projects handed to the firm (Pic: Department for Transport/Flickr)

Carillion was Britain’s second-largest construction company, employing 43,000 people globally.

Now the profit-mongering edifice of privatisation and outsourcing has collapsed.

It’s one of the largest suppliers of services to the public sector and has control of some of the biggest government contracts in Britain.Almost 30,000 people are likely to suffer cuts to their pensions after its collapse.

The government has promised to pay the wages of workers in 450 public sector contracts and urged them to keep turning up for work.

But over 11,000 private sector jobs were guaranteed for only 48 hours. Carillion had 20,000 employees in Britain and 62 percent of its work was in the private sector.

The company oversaw hospitals, schools and prisons, and had part of the contract to build HS2. It collapsed when last-ditch talks with its lenders and the government failed.

It took billions in public money.But there were problems with building the £350 million Midland Metropolitan Hospital in Smethwick and other projects.

Carillion has 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.

Because of the size of its contracts some had assumed that its lenders would take control, refloat the company or take it off the stock market by swapping their debt for new shares in the company.


Former Carillion boss Nigel Taylor (left) with former minister of state for energy and climate change Greg Barker MP and Birmingham councillors in 2012

Former Carillion boss Nigel Taylor (left) with former minister of state for energy and climate change Greg Barker MP and Birmingham councillors in 2012 (Pic: Birmingham City Council/Flickr)

But the bankers sat on their hands—there was no point bailing out a company with their own money when the government would use public money.

The government continued to award work to Carillion after it had already admitted that it was in financial trouble and its shares had collapsed by 90 percent.

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

A taxpayer loan likely to be worth hundreds of millions of pounds will be handed to Carillion’s official receiver to keep public sector operations afloat, with a precise figure announced next month.

Carillion’s collapse could trigger a “domino effect” across privatised and outsourced contractors.

In the Gulf Carillion employs 19,000 people. In Canada Carillion employs about 4,000 workers.

All of their jobs are also at risk.

Meet the bosses who snatched public money

Philip Green, chair of Carillion

Green is a £215,000-a-year self-styled Christian capitalist.

He likes to trumpet his noble deeds. “The more money you’ve got the more you should give away,” he said.

He kept enough to buy a four-bedroom house outside Cape Town and owns a £2.2 million home in Berkshire.

Green led the company’s business integrity committee.

He was appointed by David Cameron, when he was prime minister in 2011, as an adviser on corporate responsibility.

He was found in 1994 to be “in breach of trust” by the Pensions Ombudsman.

Green was a senior executive at Coloroll, a home furnishings group that went under in 1990.

The flat improperly bought by the Coloroll pension fund belonged to Green’s colleague John Ashcroft.

Richard Howson, former chief executive

Howson lives in a £2 million historic hall in north Yorkshire with his wife Geri and their two sons.

The couple also have a six-bedroom ski chalet in Rhone-Alpes, France.

He stepped down last autumn and received £1.5 million in salary, bonuses and pension last year.

Carillion agreed to keep paying him a salary of £660,000 and £28,000 in other benefits until October this year.

Richard Adam, finance director

Adam lives in a sprawling £3.5 million six-bedroom house on a private road in Hertfordshire.

Adam has had up to £2.6 million in extra cash and shares since starting in 2006.

In 2016 he was handed a bonus of £140,000 and long term incentive awards worth £278,000.

Zafar Khan, former group finance director

Khan left in September after just nine months.

He is due to receive his £425,000 base salary until September this year.

Keith Cochrane, interim chief executive

Cochrane is due to be paid his £750,000 salary until July.

Labour Baroness Morgan of Huyton

Morgan is a senior independent non-executive, was appointed to Carillion’s board in July 2017.

She was director of government relations at No 10 from 2001 to 2005 and is a former minister for women and equalities.

She is also a former chair of Ofsted.

Blacklisters ignored trade union safety concerns

Carillion admitted in the High Court that it blacklisted workers who complained about safety on its building sites. Meanwhile it was grabbing millions in public sector cash.

Workers on projects run by Carillion need to be paid and are entitled to their pensions.

Workers protesting over blacklisting in 2013

Workers protesting over blacklisting in 2013 (Pic: Guy Smallman)

But no more public money should be given to the bosses of the disgraced company.

Roy Bentham, blacklisted carpenter from Liverpool and Blacklist Support Group (BSG) joint secretary commented, “Carillion going bust to me is karma.

“They were up to their neck in blacklisting union members for raising safety concerns. They got caught and said sorry but they were only sorry for being caught.”

Dave Smith, BSG joint secretary said, “Carillion blacklisted me after I raised concerns about safety on their building sites.

“At the very same time the company were milking public sector contracts including in the NHS.

“Not another penny of taxpayers’ money should be given to these wretches.”

Nottingham Hospital PFI deal was a dangerous scam

Health campaigners kicked outsourcer Carillion out of Nottingham Hospital just in time.

Hospital bosses and Carillion agreed to terminate the cleaning contract and brought it back in house from 1 April last year.

Cleaners employed by Carillion protesting in London in 2012

Cleaners employed by Carillion protesting in London in 2012

The firm still runs parking enforcement at the trust.

Carillion took over Nottingham University Hospitals’ £200 million Estates and Facilities contract in 2014.

Throughout its tenure the multinational ran a failing service. Broken lifts in the hospital were left unfixed.

Patients and workers complained about the standards of cleanliness at both Queen’s Medical Centre and City Hospital. And in September 2016 a rat was spotted in one of the ward kitchens.

Mike Scott is part of the Notts Keep Our NHS Public (KONP) group that campaigned against Carillion at the hospital. “The KONP campaign to ditch Carillion succeeded just in time to prevent the total collapse of support services,” he said.

“Now other parts of the public sector are in the same state. Carillion should be allowed to collapse—and all public sector contracts be taken back in-house.”

Pension misery is on the cards

Almost 30,000 Carillion employees are likely to suffer cuts to their pensions after the collapse of the construction company.

People already receiving pensions will see at best no more rises in line with inflation.

Thousands more will see their pensions cut by at least 10 percent and probably as much as a fifth.

The firm’s 13 pension schemes have 27,500 members, of whom about 13,000 are already collecting a pension.

The scheme will end up with the Pension Protection Fund (PPF).

Carillion has reported a pension deficit of almost £600 million but some pension experts say this could rise to £1.4 billion. This is because of the way pension deficits for collapsed companies are calculated.

That would leave the PPF on the hook for around £800 million.

The 2016 Carillion annual report says dividends have “increased in each of 16 years since formation.” Negotiations to enter the PPF could take years.

And the pensions come after the bankers who are in the queue to get paid.

Across Britain only one in three defined-benefit private sector pension schemes are in a position to pay all members in full when the time comes.

At the current rate of failures in about 20 years, one-third of schemes would be inside the PPF.

And hundreds of thousands of workers will have their pensions reduced.

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