Carillion report must be first step in transforming shattered corporate model

Unite, the UK’s largest union, is demanding the full adoption of recommendations contained in a joint select committee report (published today Wednesday 16 May) into Carillion, and is urging the government to do far more to prevent future corporate failures.

Unite’s represents over a thousand workers affected by Carillion’s collapse. Unite’s members were spread between Carillion’s construction division, where many of them were employed in the supply chain, and on outsourced contracts in both the public and private sector.

Four months after the largest corporate failure in UK history, many of these workers have lost their jobs while others still face an uncertain future.

Since the collapse of Carillion, Unite has been calling for a transformation in government policy that halts future outsourcing of public services and ensures that existing contracts are brought back in-house.

The damning report which was jointly produced by the Work and pensions and the business select committee, said:

“Carillion’s rise and spectacular fall was a story of recklessness, hubris and greed. Its business model was a relentless dash for cash, driven by acquisitions, rising debt, expansion into new markets and exploitation of suppliers. It presented accounts that misrepresented the reality of the business, and increased its dividend every year, come what may.

“Long term obligations, such as adequately funding its pension schemes, were treated with contempt. Even as the company very publicly began to unravel, the board was concerned with increasing and protecting generous executive bonuses. Carillion was unsustainable. The mystery is not that it collapsed, but that it lasted so long.”

The report describes Carillion’s board as “responsible and culpable” for the company’s collapse and it should be “carefully considered” if they should be recommended for disqualification as directors.

In a new revelation it was revealed that as part of Carillion’s aggressive accounting practices, the company was even “accounting for revenue on work that had not even been agreed”.

The report is highly critical of the government which “lacked the decisiveness and bravery” to tackle the failure of the corporate regulations that allowed the company to effectively falsify its accounts and create an untrue trading position.

Successive government’s “nurtured” a service delivery model which made a “collapse like Carillion almost inevitable”.

Unite assistant general secretary Gail Cartmail, picking up the report’s summary that Carillion could happen again, and soon, said:

“The fall of Carillion was the inevitable outcome of a business model that embodies a ‘race to the bottom’ on bidding for contracts.

“The public sector can change that. National and local government have the power to transform outsourcing disasters by bringing services in house where profit is no longer the ideological master and for service contracts that are let to apply standards on quality and workforce concerns.

“Earlier this week we learned about rising concerns about the potential wholesale collapse of care homes as a direct result of councils cutting costs as their budgets are cut by government.

“The real victims of the ‘race to the bottom’ are service users, the workforce and suppliers. At the heart of all of this is the political choice of the Conservative government. “