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19 January 2018 - Blog by Helen McGrath, Policy & Communications Manager

Publish date: 19/01/2018

If the crisis in the NHS was not enough to substantially wobble concerns being voiced within the sector and in the media around public-sector funding, staffing, contractual management, and leadership; the shock collapse of Carillion this week has thrown the debate into sharp focus and not without good cause. I say shock of course, because many of us simply didn't see this coming but for those in the know, or rather those who should have been, the fact that Carillion issued 3 profit warnings over the last 6 months and held just £29 million at the point of collapse might have provided a clue.

Based in Wolverhampton, Carillion employs around 20,000 staff in the UK and is involved with a number of major projects including HS2, hospital builds and road bypasses. That, together with the management of pubic services such as prisons and schools and maintaining services to Network Rail and homes for the Ministry of Justice demonstrates the sheer scale of impact on the public sector. The immediate concern now is the domino effect and wider impact on the thousands of suppliers and sub-contractors. The total debt of the company has been set around £900 million and there is also a £600 million-pound deficit in the pension fund with questions now being asked around director's bonuses.

The impact on local government is still unknown but the LGA issued a news press stating that "A relatively small number of councils are affected by the collapse of Carillion. They have been monitoring the situation closely and are implementing contingency plans to keep services running as normally as possible".

There are now, of course, calls for a public inquiry which may raise some difficult questions for the Government. Bernard Jenkin, the Conservative chairman of the House of Commons Public Administration Committee, said Carillion's collapse "really shakes public confidence in the ability of the private sector to deliver public services and infrastructure".

How much of Carillion's collapse can be attributed to the negative relationship between austerity and PFI? I'll leave that one for you to mull over…