View from Chair – Is This A Sign Of The Times?

This week saw the collapse of Carillion – one of the UK’s largest contractors. It is said that Carillion’s financial problems were due to delays and significant losses on major Government contracts. Whatever the truth of the matter, the mantra for some time in the UK industry press has been that margins of around 2% are not sustainable.

Setting aside Carillion’s profit / loss issues, it is evident that Carillion’s biggest problem in the run-up to its demise was an acute shortage of cash.

While operating in a different market to Engineering Construction, the Carillion case provides salutary lessons for organisations engaged in this industry – owners, contractors and the supply network – current margins are far too low relative to the risks being taken, cash is king – it’s lifeblood, nobody is too big to fail and fall out from a major contractor failing is catastrophic for industry with the brunt of the impact being taken by subcontractors, vendors, service providers and distress for all the people involved and not forgetting that owners are left with incomplete projects and further significant investment to bring their projects to completion. It is in nobody’s interest for contractors to suffer the same fate as Carillion.

Let us all learn from the Carillion demise.