Too many firms indulging in poor business practices, London South Bank University academics add
A London university has said “a culture of financial deviance” is embedded within the construction industry with the collapse of Carillion its most high-profile example.
Research by London South Bank University said the industry “often accommodate, explain away or normalize discrepancies and problems”.
It added: “These become part of a culture which unintentionally reduces awareness of the potential consequences of that deviant behaviour. Taken together, these factors can result in a company not following codes of practice while failing to anticipate and manage a wide range of potential reputational issues and structural internal crises.”
The research project, led by Dr Sara Hajikazemi, senior lecturer in project management at the university’s business school, said this “‘normalization of deviance’ lies not only internally, but also externally, in the wider industry environment in which construction organisations operate”.
It said the competition to win work, low profit margins and the complex nature of jobs meant firms were undertaking a series of poor business practices which included late payments to suppliers and questionable accounting techniques.
Hajikazemi said: “Our research shows that ‘normalized deviance’ has always been present in the construction sector.
“What is concerning is that, as happened with Carillion, construction companies currently lack an early warning system that could alert them to emerging signs of deviant corporate behaviour and malpractice.”
Carillion’s collapse was one of the biggest business failures in UK corporate history and came less than a year after it posted a £147m pre-tax profit for 2016, down 5% on 2015’s figure, on revenue up 14% to £5.2bn. In its last ever full year accounts, filed on 1 March 2017, the firm’s chairman Philip Green said: “We have a good platform from which to develop the business in 2017.”
But in a trading update published in July that year, the firm said it was making an £845m provision on contracts, including three PPP deals in the UK. It collapsed into liquidation in January 2018.