Construction Decade in Review: 2018 - Carillion collapse causes chaos

With a new decade nearly upon us, we decided to reflect on the events of the past 10 years, and the impact they’ve had on the construction industry. The demise of Carillion dominated both industry and national news headlines in 2018…

2018 had barely begun when Carillion, one the UK’s biggest construction and facilities management organisations, collapsed and entered compulsory liquidation on 15 January 2018. It had piled up debts worth a total of £1.5 billion and had just £29 million left in the bank.

At the time, Carillion held 420 public sector contracts across hospitals, schools, road and rail projects. Notably it was part of a consortium that held the contract to build an element of the HS2 railway line.

The company employed around 20,000 people in the UK, with a further 23,000 employees across the globe based in Canada, the Middle East and the Caribbean.
 

Where did it all go wrong?

The biggest issue for Carillion was overrunning project costs. The £350 million Midland Metropolitan Hospital was due to open in October 2018, but issues with heating, lighting and ventilation systems pushed the launch date to spring 2019.

Reports of structural problems in the £335 million Royal Liverpool Hospital meant that project’s completion date was pushed back on several occasions.

Carillion was also part of a consortium which was building the £745 million Aberdeen bypass. The bypass was due to open in 2017, but slow progress meant that it wasn’t completed until February 2019. In addition, the consortium was issued with a £280,000 penalty after it polluted two salmon rivers.
 

Impact on the wider UK construction industry

Carillion earned a reputation for being a late payer, stretching its payment contract terms to 120 days the year before it collapsed.

In November 2018, the government announced a new prompt payment initiative to ensure that all suppliers and subcontractors on public sector projects are paid on time. The new initiative means that any construction company that fails to pay its suppliers and subcontractors within 60 days will run the risk of being barred from bidding for public sector projects.

So far, as a result of the new initiative, Kier, Seddon Construction and McNicholas Construction Services have been suspended from bidding for public sector projects after failing to pay 95% of their supplier invoices within 60 days.

 

More posts in our ‘Construction Decade in Review’ series

2010: How a fragile coalition set the stage for the decade

2011: Leaning tower sets a new world record

2012: Construction takes gold

2013: Help to Buy mortgage scheme launches

2014: Construction health and safety failings hit home

2015: Construction Design and Management Regulations come into force

2016: Modernise or die – a shocking message to the sector

2017: A year we’ll never forget…

 

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About the Author: Emma Sisson

Emma is LMC's PR assistant and works across most of our PR accounts. She is most often found selling in stories to local, national and trade press and helping clients to monitor the impact of their media coverage.

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