This is one of the most dramatic corporate failures in recent years. With ￡ 2 billion in debt, Carillion is likely to deprive thousands of workers, directly or indirectly, of their livelihoods. The company left only 29 million pounds in cash. This shows the new level of weakness that Britain will feel.
For Carillion City Hall is not only a large construction company: it has entered the profitable public service delivery business. Shocks are felt not only at construction sites, but also at many schools, hospitals and even prisons, and thousands of cleaners, porters and maintenance workers suddenly discover that their employer has gone bankrupt.
Hospital and school workers in TV news are worried about their next paycheck, which is a strong warning of the depth of privatization into everyday life.
The school is run by a school meal owned by Private College Trust and Carillion and others. Turn on the lights, catch the bus, get on the job, turn on the oven, drink a glass of water, sign up for an apprentice, use the train, park your car or eat in the hospital cafeteria – it’s all provided by a private company.
The number of activities now done by all our organizations is the smallest. Everyday life now depends on private companies with private aspirations.
The exchange of public and private is not new, as old as the country. Elizabeth I’s navy was built at a private shipyard; the aircraft and the engines that won the Second World War were built in corporate factories. There’s nothing new about outsourcing or open debugging, where the debate draws – whether the contractor will honor their promises.
It was Margaret Thatcher who saw the first massive rezoning and the massive wave of privatization.
Private owners are bound to perform better than public ones because they are private. But that’s just the beginning.
Why can not we extend the same principle to the central areas of public service of the central and local governments? Private companies like Capita or Carillion can accept commissions and perform state functions cheaper than the government itself. The country may be but a commissioning and purchasing agency. The public service delivery industry was born.
In the 1990s, the John Mayer administration flirted further with private companies owning and financing public facilities such as hospitals and prisons. However, regardless of the ideological appeal, private borrowing costs are very high.
The New Labor Party is passionate about privately lending public books and is thriving at any cost to the PFI: almost all UK PFI deals (more than 700 of them) are done by New Labor.
Now there is a feeling that with every successive scandal, more and more people think daily privatization has gone too far – 80% of opinion polls show the polls are shocking. Opposition leader Jeremy Corbyn said Carrie’s failure was a crucial moment.
Carillion’s failure is part of a broader story of corporate accidents and crashes. The financial crisis, which started with Northern Rock and eventually sank at the Royal Bank of Scotland, was a turning point: banks and building societies are no longer credible.
Since then, a string of distinguished British names have been involved in different crises. BT, Tesco and, more recently, GKN, suffered millions of pounds of accounting irregularities, causing GKN’s share price to fall, leading to a hostile takeover of ￡ 7.0 billion last week.
The public service sector to which Carillion belongs is not exempt. Serco and G4S must repay ￡ 180 million to flag overcharging of prisoners.
Learndirect, a private equity firm that was privatized in 2011 and sold to Lloyds Bank, until recently the country’s largest training agency proved to have systematically closed down a third of apprentices. Is receiving the national audit investigation.
Stagecoach and Virgin said they would leave their East Coast mainline contract unless the government gave up ￡ 2 billion in contract payments.
The PFI seeks to get debt out of government books, and it turns out that the private sector is hugely beneficial. Taxpayers pocket up to 150 billion pounds. Now Cari llion.
But is capitalism, or British-style capitalism, faulty? As promoters of capitalism and the private sector, the Conservatives do not see any difference and the current Labor leadership does not accept political gifts.
The dogma and deceptions of privatization must come to an end, accepting the attacks of Jeremy Corbin and John MacDonald: the answer is obviously nationalization and the contract is brought back “internally”, and the election of labor would be the legal requirement. Taxpayers pick up the bill will no longer have the indulgence of the private sector. After issuing a series of profit warnings, Carillion can continue to obtain the contract last year, including HS2? Most importantly, the worker said, seems to be a law for workers, which is a law for overpaid directors.
These are criticisms, but they are not caught in why so much went wrong. The nationalized industry in the United Kingdom is inefficient and investment continues to be insufficient. It is a powerful voice to act internally, but there is no miraculous cure.
Although some public sector deliveries are outstanding, the overall picture is even more irregular, especially in some NHSs. Because of this, for decades, the government has been contracting with the private sector to provide goods and services. If high-quality private-sector partners meet this standard, it is not unreasonable to try to broaden this principle: the problem is that they are in short supply. Likewise, a well-designed private-funding initiative could have shifted equity and debt to the private sector more equitably. Why does a British company pursue such an impossible and unfair deal?
Some of the answers lie in the Carillion scandal. If they can keep the share price up, then its senior directors get a very good return, which means there is no room for the company to minimize short-term and cap investment. Carillion may be spared, but his successor inevitably knocked it down.
When a director’s remuneration package changes on a small statement, even if Carillion goes bankrupt, he or she can still pay an excessively high short-term bonus, but none of the shareholders is aware of the change. There are no proxy polling agencies and many shareholders entrust them with voting and decision-making powers. In fact, when Carillion finally begged the government for a short-term ￡ 150m loan, no investor fought alongside them and they were installing or supporting a rescue package. Major shareholder’s activity is short selling stock.
This is a no-owners company without any purpose, except that it appears to enrich its directors and keep its unprofitable multiple shareholders from one profit reporting period to another. No mission, no pursuit of excellence, no service pride. Staff is a one-time symbol on the spreadsheet. However, this may be different.
This discomfort is at the heart of many British companies and is a behind-the-scenes factor in catastrophe and poor economic performance. An international investment manager who wants to remain anonymous says British companies suffer disproportionate losses from irregularities, fines, missing profit forecasts and misconduct compared to companies that invest in other countries. This is part of a broader picture of British companies that tend to underinvest and underinvest and become the highest in the world for every pound of sales even as executive pay grows at an alarming rate.
What should I do? A notable difference between the UK’s purpose-built Corporate Task Force, a purpose-built Corporate Task Force in the 2016 evidence report (full declaration: I’m co-chair), is that British bid houses do not own the critical mass of their shares (jargon In the major shareholders) – loyal owners who will support them through profound knowledge. On the contrary, British companies have the most widely diversified and traded shareholder base in any advanced corporate world in the advanced industrial world.
With so many shareholders, any single voice can easily be overlooked. Standards become immediate financial performance. Concerns about short-term share prices are unavoidable, with shareholders linking executive pay to achieving that goal.
Most importantly, there is a culture imported from the United States that, as evidenced by the free-market theory prevailing in the 1970s and 1980s, has the sole purpose of making as much money as possible.
In the notion of Professor Milton Friedman, a company can only make a lot of money if it can provide both economic and social benefits. However, maximizing shareholder value has become the god of British intellectuals.
UK company law does not require companies to claim any purpose at the time of incorporation: In fact, the entire ecosystem in the UK is organized as a short-term financial priority, and all others make the company a great thing – people, their clients, their ability to innovate , Claiming the reason – came in second place. Bad economics combined with a unique British institution delivered what we now have: a rogue capitalist form.