At 8am on January 15, 2018, Steve Paul took a phone call from a supervisor at the Midland Metropolitan Hospital site. Steve, who ran a large plastering company with his wife Steph, had been contracted by Carillion to build floors at the brand-new 670-bed “super hospital” in Sandwell.
That morning, workers arrived to find they were locked out as the outsourcing giant collapsed. For Steve, who had built a family business from scratch after leaving school to become a plasterer, and his wife Steph, this was the moment their nightmare began.
“We couldn’t pay for the men, we couldn’t pay suppliers and we couldn’t pay for the plant,” he says. “The dominoes came tumbling down.”
Four years on, the Pauls have lost everything, even their home. They sold their successful business for just £2. Yet the men who ran Carillion have walked away from the wreckage of the bloated outsourcing giant without a scratch. No one has been held to account. No criminal charges have been brought. There has been no watershed for outsourcing.
On Saturday it will be four years since Carillion burned in a bonfire of its own corporate greed. And nothing has changed.
This, despite the fact that 3,000 people lost their jobs, and 7,500 people in the supply chain were affected. Family businesses went to the wall, with 30,000 suppliers owed around £2bn. There was a £2.6bn pensions black hole, and the company was a staggering £7bn in debt. The collapse left the taxpayer to pick up a bill for hundreds of millions of pounds at the Midland Metropolitan University and Royal Liverpool Hospitals and 13 other NHS contracts.
This week, KPMG – the company supposed to be auditing the accounts and that could have warned of Carillion’s imminent demise – admitted misconduct at a tribunal held by the Financial Reporting Council.
The case remains ongoing, but there are allegations that spreadsheets were doctored to avoid deeper scrutiny by auditors that made £29m over 19 years from Carillion. While that scrutiny was missing, Carillion was able to pay out £79m in dividends including huge bonuses for bosses in the weeks before it collapsed.
Ultimately, the Carillion story is one of deep-rooted, almost messianic Tory ideology. The company was the poster child for outsourcing. It built hospitals, barracks, houses, prisons, roads, holding over 450 construction and service contracts across government. It had 18,000 employees in the UK.
Its bosses were deeply enmeshed with the Conservative Party. With bitter irony, Philip Green, the Carillion Chairman (not to be confused with the BHS boss) was an adviser to David Cameron on Corporate Responsibility while he was Prime Minister. Awarded a CBE in 2014 for “services to business”, in April 2015, he signed a letter from 100 ‘industry leaders’ telling the British public to Vote Tory.
Carillion CEO Keith Cochrane, who took over from Richard Howson as the company failed, was an adviser to the Scottish Secretary David Mundell, and appointed CBE in 2016.
Meanwhile, Andrew Davies, appointed to lead the turnaround of Carillion in October 2017, had formerly led the Wates Group, which had given £430,000 to the Tories over the previous decade, including a £50,000 donation just before the 2017 General Election. If the government appears to have been curiously blind to Carillion’s problems, sub-contractors were already in a deep state of anxiety months before the collapse.
Dan (not his real name), 42, was working on a bypass project in Cheshire. “In July 2017, there was a profit warning that caused me the worst stress I had ever experienced in my life,” he says. “At the time I had a three-year-old daughter and a mortgage to pay.
“Carillion kept telling us, ‘We will get through this’. I remember January 15, 2018 vividly. I was listening to Talk Sport radio, and I heard on the news that Carillion had gone into compulsory liquidation.”
Four years on he says: “There has been no justice, the directors knew this situation was coming but nobody did anything. It makes me angry.” Eddie Broadley, 57, worked for Carillion for almost 15 years on highways projects.
“From my perspective, the people who played the game, never had to pay,” he says. “We were told by senior leadership we should not take any notice of anything we read and hear on the news. The next thing, we were hit with a bombshell.”
Steve and Steph Paul lost £700,000 and had to let 100 people go when Carillion collapsed, resulting in a breakdown for Steve.
“I’ve taken some hits in business in my time, but Carillion put me over the edge,” he told Bob Wylie for his book, Bandit Capitalism – Carillion and the collapse of the British State. “It broke me. I couldn’t take it any more.”
Some of Carillion’s victims were the lowest paid in Britain – dinner ladies, cleaners, maintenance staff. Hospital porters like Jimmy, who I spoke to the week of the collapse, battling his way through that year’s winter crisis. After joining the NHS, he’d hated being outsourced to cowboys like Carillion. “As soon as we went over to Carillion, they cut the jobs in half and it just stopped being a good place to work,” he told me.
One of the cities worst hit was Liverpool, where among other projects, Carillion was building a new flagship hospital, the Royal Liverpool, due to open in 2017. “The new Royal Liverpool Hospital remains unfinished following the collapse of Carillion,” says Liverpool MP Dan Carden.
“It now stands as a symbol of Britain’s rotten corporate culture. While executives protected their bonuses and shelled out dividends to shareholders, workers and communities have paid the price. Suppliers went unpaid; workers lost their jobs and livelihoods; the people of Liverpool lost out on a new hospital they desperately needed during the pandemic. It is unacceptable that four years on, no one has been held to account.”
In Wylie’s book, Gary Smith GMB’s Scotland’s General Secretary predicted: “Thousands of jobs will go. The subbies [subcontractors] will be slaughtered. The taxpayers will have to cough up and the top people will walk away, not a single hair on their heads out of place.”
Steve Paul puts it another way: “I’d say it was organised crime. The big people get away with it. And it’s the small people like us, who pay the price.”