The fallout will continue for months, says analyst Alastair Stewart
There has never been any UK construction collapse remotely as big or spectacular as Carillion’s today.
The fact it was an extremely rare compulsory liquidation rather than what had been mooted as an administration, at worst, is evidence that, as one insolvency practitioner has let it be known, “there is little if any worth left in the company”. The reverberations will continue for months.
My immediate impressions? First, and contrary to perceived wisdom over the past few days, no construction/services group is ‘too big to fail’, not with the PM reportedly fending of any taxpayer “bail-out”. This was the coup de grace. Only on Friday evening, Carillion stated it was in “constructive discussions” with its financial and other stakeholders. That now sounds as euphemistic as Premier League clubs insisting “the manager continues to enjoy the complete support of the board” .
Most contracts will carry on, albeit with delays. But, in the words of the imaginary jobbing builder, “it’ll cost you mate, sorry, minister” . Government departments will now have to renegotiate contracts, presumably on terms more grounded in commercial reality.
Balfour Beatty, Galliford Try are among a litany of companies alerting the market to the cost of their cases. The speed with which they were issued a clear indication that the industry has been calculating the likely cost longer than most in government or the banks.
The real cost for the industry is likely to come in a domino effect through the supply chain, especially subcontractors. This could lead to new delays and costs for rival contractors that thought they were off the hook.
Alastair Stewart is an equities analyst and commentator