Reaction to the collapse of the UK’s second largest construction group has focused on the reasons why the company’s troubles were allowed to push it past the point of no return.
Roger Barker, head of corporate governance at the Institute of Directors, said: "It is clear that major providers of public services must be governed in a prudent manner. Today’s outcome suggests that effective governance was lacking at Carillion, and we must now consider if the board and shareholders have exercised appropriate oversight prior to the collapse."
He added that the decision to relax clawback conditions for executive bonuses in 2016 now appeared "highly inappropriate". He said: "It does no good to the reputation of UK business when top managers appear to benefit in spite of the collapse of the organisations that they are responsible for".
These comments were echoed by Lord Adonis, the former Labour minister and recently resigned chair of the government-backed National Infrastructure Commission. He said in a tweet this afternoon: "Carillion: Shades of a British Enron. Wild overbidding, fast-and-loose & grossly overpaid management, taxpayers taken for a ride, AWOL auditors & pliant/ignorant ministers and officials. This is going to run & run!"
Steve Webb, the former Liberal Democrat pensions minister, pointed out that Carillion’s 2016 annual report said its dividend payouts had increased in each of 16 years since formation of the company, then inquired: "Is this really acceptable alongside a pension fund deficit over half a billion pounds?"
Shehab Khan, a political commentator, added that Richard Howson, the former chief executive of Carillion, would be paid for 12 months after he resigned. "He stood down after Carillion issued a shock profit warning and is still being paid his £660,000 salary and £28,000 benefits." This is on top of the £1.5m in pay and perks he received in 2016.
Tim Roache, the general secretary of the GMB Union, said the Conservative government was "asleep at the wheel" when it continued to award work to Carillion despite its profit warnings. He also attacked the policy of outsourcing public sector work. He told Sky News this morning: "We’re demanding assurance from Prime Minister Theresa May that Carillion contracts are taken back into public ownership – where they belong and should have been in the first place."
Others were quick to point out that the Labour administration at Leeds council had awarded Carillion a £14m contract a week ago.
Vince Cable, the Lib Dem leader and former business secretary, pointed out that there would be some winners – hedge funds – from the collapse. He told BBC: "What is so galling, and is going to anger people so much, is the taxpayer is going to finish up paying a substantial bill for this collapse, while at the same time, the hedge funds have pocketed £300m effectively gambling against government decisions."
A more acceptable gainer may be the SMEs that make up the overwhelming majority of the UK’s construction sector. The Federation of Master Builders (FMB), which represents smaller firms, said the collapse showed the risks inherent in over-relying on large construction groups for public sector work.
Brian Berry, the chief Executive of the FMB, said: "Carillion’s liquidation will have serious knock-on effects for the many smaller firms in its supply chain, some of which will be in serious financial danger."
He said the government should now "open up public sector construction contracts to small and micro firms by breaking larger contracts down into smaller lots. That way, it can spread its risk while also reaping the benefits that come from procuring a greater proportion of its work from a broad range of small companies".
Image: Tim Roache of the GMB union comments on Sky News