Jan 15 2018

The demise of Carillion won’t detoxify construction

Carillion logoAt about 7am this morning, UK construction and services business Carillion plc said it would be going into liquidation – less than six months after a July 2017 profits warning more than halved its share price, heralding the final chapter of a dramatic plunge into disgrace. I have been watching this disaster unfold with morbid fascination as, like many construction folk, I have multiple connections with the firm.

During the mid-late 1990s, I worked for Tarmac Professional Services, part of the group of businesses rebranded as Carillion in 1999 (my pension remained with Tarmac, so – fingers crossed – part of my retirement fund has been unaffected by today’s revelations). I retain many friendly connections with former colleagues employed by the group, and – as a technology evangelist, PR practitioner and writer – I have had frequent contact with Carillion and supply chain friends working with extranets, mobile technologies and BIM, and with industry PR, marketing and journalism.

At TPS I was part of a group of people endeavouring to apply the 1994 Latham reforms, and we had some notable successes in promoting more collaborative forms of working. However, the sudden death of CEO Steve Redding (for a while my line manager and friend) in a motorway accident was followed by other personnel changes, and, after I left in 1998, the business until today known as Carillion largely reverted to its hard-nosed adversarial contracting origins, with a culture that embraced primitive industry practices such as employee blacklisting and late subcontractor payment.

This formative experience coloured my view of UK construction, and in debates about the “the image of UK construction” I have repeatedly drawn on that background to highlight why construction deserves its poor reputation. As I have previously written, UK construction, in too many businesses, is:

  • overly-complex, fragmented and price-fixated in its procurement approaches
  • adversarial in its supply chain relations
  • poor in its payment practices
  • wasteful in its project execution (often late and over-budget)
  • conservative in its adoption of new technologies, and
  • short-termist and reactive in its approach to human skills development and R&D.

(Other scandals – too often denied or side-stepped – include poor health and safety, shoddy workmanship, workplace sexism, racism and homophobia, and feudal practices such as spiralling ground rent payments.)

The recent history of Carillion adds to the overall sense of industry failure, not least in terms of boardroom complicity and lack of transparency. Earlier this month, the UK Financial Conduct Authority said it was to investigate the timeliness and content of Carillion announcements from December 2016 regarding its financial situation. The self-serving nature of these announcements has been called into question given the Carillion board’s recent decisions to continue dividend payouts to shareholders, and to award and protect bonus payments to key executives, while the debt mountain and pension deficit continued to mount and while failing contracts exacerbated the problems (I would also question the wisdom of Government ministers in awarding new contracts to Carillion despite the financial warnings – but, hey, let’s not be too political!).

These are, in part, strategic communication failures that could have been avoided. Instead, a poor business culture at multiple levels within the company was allowed to persist, and to reinforce the poor image of construction rather than helping to rectify it. Carillion’s demise is putting construction in the headlines for the wrong reasons yet again, and helping reinforce negative views of the sector as devious, outdated and Dickensian. However, I fear Carillion’s eventual disappearance won’t detoxify an industry where many businesses exemplify the same old behaviours and attitudes.

1 comment

  1. A very grim, but accurate picture. And unfortunately, these engrained attitudes and cultures are too often passed from top to bottom, influencing the attitudes of newbies and emerging talent/management in the industry; and so the cycle starts again. I feel for the businesses that will be hit with 120day+ outstanding invoices that will never be fulfilled and the people who have worked hard day to day only for the rug to be pulled from beneath them.

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