The Carillion troubles we recently reported are increasing. The UK government is standing back while Carillion holds talks with its bankers this weekend. More meetings will be held on Monday, but it’s difficult to see what is not agreed over the weekend will suddenly be agreed on Monday.
Who is Carillion?
Carillion is a construction company with a number of major government projects in hand. They include parts of the HS2 High Speed between London, Birmingham, Leeds and Manchester. Carillion is also responsible for the management of almost 900 schools around the country.
It also maintains 50,000 homes under the control of the Ministry of defense, contracts for prison maintenance of over £200 million and is the second largest supplier of service to the UK rail network, Network Rail.
Moral Government Duty to Carillion?
It could be claimed that the government has a moral duty to help the company at this time. After Carillion offered a profits warning and its Chief Executive departed the company, the UK Transport Secretary Chris Grayling awarded Carillion the HS2 contract. Maybe he felt sorry for the company and was trying to give it a boost, but that is abominable management by a government minister were it the case.
Many thousands of jobs are now at risk. However, in the eyes of many, that is not the main issue. The main issue is that vital public services and infrastructure are now at risk worldwide. Brandon Lewis, the recently appointed Chairman of the Conservative party, stated that the “the government is keeping a very close eye on this.” There is no indication yet that the Government could bail the company out.
Carillion Troubles Grow as Banks and Government Wait
It is probable that the banks will wait for a few weeks before taking their own actions. They will like await potential solutions to be proposed, and will also press the government to find a solution. This presents the government with a serious problem. It has only two options:
- To let the company fail with the loss of thousands of jobs, or
- To bail it out using taxpayers money just a few months after the company paid its shareholders a good dividend
Meanwhile, the company’s problems are growing and much needed help is being withheld. The Carillion troubles may not all be its own fault. After all, much of its work involves government contracts. Time will also resolve this question!
Carillion Troubles Increase
The Liberal Democrats are against the second of these. Its leader, Sir Vince Cable, is urging the Tory government not to agree to any Carillion bailout. In fact, in general terms, none of the solutions involving the government is a good one, certainly not in moral terms.
Private companies should not look to governments and public money when their businesses go bust! Time will tell how the issue is resolved if it ever is. Meanwhile, the Carillion troubles increase as the government stands back in the wings.