HS2 in the SH1..? Carillion collapse...

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DarnWeightDarnWeight Frets: 781
edited January 15 in Politics Economics
Looks like Carillion are in serious difficulties, putting HS2 and a lot of other government-funded public works (prison maintenance, school building, MOD housing, big chunks of Network Rail, etc) in a spot of bother.  They employ nearly 20,000 people here in the UK.  Here's the latest on it from the BBC...

http://www.bbc.co.uk/news/business-42656879

I smell a taxpayer-funded bailout a la the recent Virgin Trains debacle. 

Grayling should be toast if any of this comes to pass.
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  • BoromedicBoromedic Frets: 642
    edited January 12
    Hope not, they should let the whole lot come crashing down as Carillion has over stretched itself and that is not the fault of the tax payer, nor is it the same as letting the banks fail. They've even been partnering up in the middle east and tendered for a massive mall contract which they won in partnership with a local firm, that is ridiculous behaviour when you are already millions in debt.

    Hopefully HS2 will fall apart as well, can you imagine the uproar if May decides to pump millions into saving Carillion but has allowed the NHS crisis to go on unabated and even ignored it? 

    She is already patently unpopular, can't see that going across well........

    .....and what to my wondering eyes should appear.....      nothing.......


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  • GarthyGarthy Frets: 1553
    Sounds like chickens coming home to roost. Let the shareholders bail it out.
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  • exocetexocet Frets: 489
    A friend of mine manages government contracts that Carillion deliver against. Many months ago when the financial difficulties became very apparent, he was “told” by senior “mandarins” to allow Carillion to exercise their right to increase prices by 20% on a case by case basis. 
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  • ICBMICBM Frets: 30357
    Just another aspect of 35 years of Thatcherism, privatisation and contracting out finally coming home to roost.
    "Take these three items, some WD-40, a vise grip, and a roll of duct tape. Any man worth his salt can fix almost any problem with this stuff alone."
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  • NiteflyNitefly Frets: 1907
    Where has all the money gone?

    If they have all these contracts to do all this work, how can they be in debt?

    If they get thrown to the wolves, will we have to pay again for the same stuff?

    Grown most uncommonly fat!
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  • FretwiredFretwired Frets: 14899
    Looks like Carillion are in serious difficulties, putting HS2 and a lot of other government-funded public works (prison maintenance, school building, MOD housing, big chunks of Network Rail, etc) in a spot of bother.  They employ nearly 20,000 people here in the UK.  Here's the latest on it from the BBC...

    http://www.bbc.co.uk/news/business-42656879

    I smell a taxpayer-funded bailout a la the recent Virgin Trains debacle. 

    Grayling should be toast if any of this comes to pass.
    Won't happen. Carillion is enormous. The divisions working on the profitable PFI contracts will simply be sold off or split and the rest allowed to crash. The pension fund is a big problem. Years of low interest rates are taking their toll.
    My pump-action drivel gun is smoking hot today!
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  • ICBMICBM Frets: 30357
    The government should simply buy the shares at the market rate - just as they should have with Railtrack back in the 90s when they were worth pennies. That way the whole thing gets renationalised for a song - currently something like 61m according to the BBC - and we can start afresh.

    Shares can go down as well as up, that's capitalism.
    "Take these three items, some WD-40, a vise grip, and a roll of duct tape. Any man worth his salt can fix almost any problem with this stuff alone."
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  • VimFuegoVimFuego Frets: 5919
    edited January 13
    except of there's a sniff of the government doing that then the city wiseguys will pile in beforehand and fill their boots. Perhaps that's why the govt is delaying, give their mates time to set up offshore accounts. allegedly. 

    I'm not locked in here with you, you are locked in here with me.

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  • ICBMICBM Frets: 30357
    VimFuego said:
    except of there's a sniff of the government doing that then the city wiseguys will pile in beforehand and fill their boots. Perhaps that's why the govt is delaying, give their mates time to set up offshore accounts. allegedly. 
    If they really wanted to do it they could just make a compulsory purchase with the price fixed, so that couldn’t happen.

    I think that’s more or less what happened with the RBS buy-out, but I would need to check.
    "Take these three items, some WD-40, a vise grip, and a roll of duct tape. Any man worth his salt can fix almost any problem with this stuff alone."
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  • GarthyGarthy Frets: 1553
    The RBS buyout was disgraceful. The share price was about 3 pence or around that and the shareholders should have taken that or stumped up the £58bn needed to fund the fucking thing. Failing that it should have been nationalised for a pound and not a penny more.
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  • FretwiredFretwired Frets: 14899
    edited January 13
    There's no need for the government to act. It's the unions asking them to do so. The company will fold and out of the ashes will rise rise a new entity funded by an 'City-based investment vehicle' which will dump the pension and the rip the arse out of the good contracts and make some serious cash. Asset strippers.

    RBS couldn't be allowed to fail.
    My pump-action drivel gun is smoking hot today!
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  • ToneControlToneControl Frets: 3994
    ICBM said:
    Just another aspect of 35 years of Thatcherism, privatisation and contracting out finally coming home to roost.
    whereas no government-run department has ever run into difficulties ;-)
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  • ToneControlToneControl Frets: 3994
    Fretwired said:
    Looks like Carillion are in serious difficulties, putting HS2 and a lot of other government-funded public works (prison maintenance, school building, MOD housing, big chunks of Network Rail, etc) in a spot of bother.  They employ nearly 20,000 people here in the UK.  Here's the latest on it from the BBC...

    http://www.bbc.co.uk/news/business-42656879

    I smell a taxpayer-funded bailout a la the recent Virgin Trains debacle. 

    Grayling should be toast if any of this comes to pass.
    Won't happen. Carillion is enormous. The divisions working on the profitable PFI contracts will simply be sold off or split and the rest allowed to crash. The pension fund is a big problem. Years of low interest rates are taking their toll.
    Ferranti was an often badly-run company, which had almost 100 years of government contracts, but always screwed up some deal or delivered so badly that it lost the government contract in a specific sector
    It was one of, if not the biggest IT place in the UK, yet when it did another stupid thing (buying a US firm with toxic debts in an attempt to expand), it was allowed to fail, and indeed split into chunks, some more profitable than others, some bought by competitors. This is surely an underlying principle of private companies - if they fail, they fail.

    I think pension funds should be ring-fenced long-term within company accounts.
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  • ToneControlToneControl Frets: 3994
    Fretwired said:
    There's no need for the government to act. It's the unions asking them to do so. The company will fold and out of the ashes will rise rise a new entity funded by an 'City-based investment vehicle' which will dump the pension and the rip the arse out of the good contracts and make some serious cash. Asset strippers.

    RBS couldn't be allowed to fail.
    would Jezza nationalise it?
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  • mellowsunmellowsun Frets: 2288
    edited January 14
    This is the way many companies are run now - pump them full of debt, extract maximum bonuses and dividends, walk away a millionaire while it all collapses.

    The Tories will bail them out because they believe in privatising the profits and socialising the losses.
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  • randellarandella Frets: 1676
    Nitefly said:
    Where has all the money gone?

    If they have all these contracts to do all this work, how can they be in debt?

    If they get thrown to the wolves, will we have to pay again for the same stuff?

    @Nitefly ; I was wondering that. Smells a bit like East Coast Rail where the bids for the franchise from the operators are impossibly cheap, consequently the whole thing goes to shit. You and I fund a bailout, they walk away from the contract considerably richer, rinse and repeat. 

    Why the government sold the bloody thing to Stagecoach when it was making millions is beyond me. 

    This Carillion nonsense hasn’t come as much of a surprise if I’m honest. 

    As re. your last question: yes. We will. 
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  • BoromedicBoromedic Frets: 642
    edited January 14
    Therein lies the reason why some people get twitchy about privatising things like the health service. We end up paying more for worse service and the same level of inefficiency. Loads of companies rinse the public purse for vast sums and then walk away scott free when it turns to shit. There should be a law or at least the will to prosecute them if there is one. 

    Time and again people talk about privatising the NHS to deal with waste and inefficient management. Yet examples like this show why we are right to hesistate. As stated above, privatised profits socialised losses. Its a disgrace and from what I hear from those in the armed services, its not like Carillion were offering great value for money or good service. 

    .....and what to my wondering eyes should appear.....      nothing.......


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  • ICBMICBM Frets: 30357
    Boromedic said:
    Therein lies the reason why some people get twitchy about privatising things like the health service. We end up paying more for worse service and the same level of inefficiency. Loads of companies rinse the public purse for vast sums and then walk away scott free when it turns to shit. There should be a law or at least the will to prosecute them if there is one. 

    Time and again people talk about privatising the NHS to deal with waste and inefficient management. Yet examples like this show why we are right to hesistate. As stated above, privatised profits socialised losses. Its a disgrace and from what I hear from those in the armed services, its not like Carillion were offering great value for money or good service. 
    Exactly.
    "Take these three items, some WD-40, a vise grip, and a roll of duct tape. Any man worth his salt can fix almost any problem with this stuff alone."
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  • exocetexocet Frets: 489
    edited January 14
    Boromedic said:
     Its a disgrace and from what I hear from those in the armed services, its not like Carillion were offering great value for money or good service. 
    Shocking value for money from what I hear as well. They win contracts by deliberately bidding the lowest (unrealistically low) ..then attempt to "up sell" every engagement in an attempt to generate profit. I've heard that they are also unbelievably incompetent as well - shoddy workmanship is their "go to" approach.
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  • BoromedicBoromedic Frets: 642
    Yeah this fits with what I've heard from friends in the MOD as well.

    .....and what to my wondering eyes should appear.....      nothing.......


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  • NiteflyNitefly Frets: 1907
    Well, they've gone for a shit now...

    http://www.bbc.co.uk/news/business-42687032

    So I guess we'll find out!

    Grown most uncommonly fat!
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  • DarnWeightDarnWeight Frets: 781
    Compulsory Liquidation, not Administration, so looks like the split-and-restructure option is completely off the table.
    New fangled trading feedback link right here!
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  • ICBMICBM Frets: 30357
    Compulsory Liquidation, not Administration, so looks like the split-and-restructure option is completely off the table.
    It needs to be completely nationalised - to prevent the private sector cherry-picking any profitable parts and leaving the taxpayer to pick up the loss-making ones and the pension fund shortfall.

    I doubt this government will accept that though.
    "Take these three items, some WD-40, a vise grip, and a roll of duct tape. Any man worth his salt can fix almost any problem with this stuff alone."
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  • DarnWeightDarnWeight Frets: 781
    Modded the thread title to be clearer that it's about the Carillion news
    New fangled trading feedback link right here!
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  • FretwiredFretwired Frets: 14899
    Compulsory Liquidation, not Administration, so looks like the split-and-restructure option is completely off the table.
    Liquidation allows the good bits to be saved and the rest junked. A lot of the contracts were subcontracted out to other companies so these companies can carry on working - this is what I understand has happened with the prison service contract. The government will just pay the sub contractors. I guess that could happen with other contracts.
    My pump-action drivel gun is smoking hot today!
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  • stickyfiddlestickyfiddle Frets: 8716
    I know nothing of Carillion's finances, but a company like that shouldn't have significant amounts of debt beyond working capital and such. It should be setting up SPVs to shoulder the risk and responsibility of each specific project. If one fails then the parent co shouldn't be significantly affected. That clearly hasn't happened, or they've made so many bad investments and/or won too many jobs by bidding cheaper than they can actually afford to do the job.

    As such, it should absolutely be allowed to fall over. The healthy projects can be bought out by other investors and the bits that are failing should be shuttered. 
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  • DarnWeightDarnWeight Frets: 781
    Fretwired said:
    Compulsory Liquidation, not Administration, so looks like the split-and-restructure option is completely off the table.
    Liquidation allows the good bits to be saved and the rest junked. A lot of the contracts were subcontracted out to other companies so these companies can carry on working - this is what I understand has happened with the prison service contract. The government will just pay the sub contractors. I guess that could happen with other contracts.
    Happy to be corrected (business/finance isn't my area), but that wasn't my understanding.  I thought liquidation basically entails the entirety of the company's assets being used to service all its outstanding debts/liabilities.  Given the scale of debt involved in this case, it's hard to see how anything could be conveniently hived off and not included as a recoverable asset.

    If anyone wants to explain the difference in words of a few syllables, would be very interested to hear.
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  • VimFuegoVimFuego Frets: 5919
    liquidation means all assets will be sold to pay the debts. Assets include (bit not limited to) order books, subsidiary companies, existing contacts and so on, all of which have a value on the open market.

    I'm not locked in here with you, you are locked in here with me.

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  • FretwiredFretwired Frets: 14899
    VimFuego said:
    liquidation means all assets will be sold to pay the debts. Assets include (bit not limited to) order books, subsidiary companies, existing contacts and so on, all of which have a value on the open market.
    ^^

    This. That's why the directors have gone this route. Looks like the prison service contract may be sorted out - the government may buy it and make the staff public sector employees.
    My pump-action drivel gun is smoking hot today!
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  • mellowsunmellowsun Frets: 2288
    edited January 15
    I think the failure of Carrion shows that you can't make a profit running essential public services. Prisons, schools, health should be run in the national interest, not by sharks.

    Edit: looks like the usual 'pump full of debt and extract maximum salaries and bonuses', as I suggested, was in fact the case here:

    https://www.theguardian.com/business/2018/jan/15/carillion-highly-inappropriate-pay-packets-criticised
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