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- The collapse of Carillion could be “the first in a series of crises for construction’s big players,” according to leading consultant Mark Farmer.
- Farmer told Business Insider that Carillion could be the first of several household names to fall if the industry does not “overhaul itself.”
- “The scale and cost of this are yet to be fully grasped,” Farmer said.
LONDON – The collapse of Carillion could be “the first in a series of crises for construction’s big players,” according to leading industry figure Mark Farmer.
“Carillion’s exposure and breadth of operation mean that its liquidation will now send ripples through the entire supply chain, potentially affecting tens of thousands of jobs and a gigantic portfolio of active work,” Farmer, chief executive of Cast consultancy and author of a government-commissioned 2016 report on the UK construction industry, told Business Insider.
Crisis-hit construction firm Carillion fell into compulsory liquidation on Monday after running up losses on major contracts and battling a £1.5 billion debt pile. It was one of the government’s biggest contractors, supplying construction services to flagship infrastructure projects as well as providing services to the NHS, schools, hospitals, and prisons.
The scale and cost of this are yet to be fully grasped
Up to 43,000 jobs, including 19,000 in the UK, are thought to be at risk, and as many as 30,000 small businesses are thought to be owed money by Carillion, according to trade group Build UK, some of which appear likely to collapse.
Construction work at over £1 billion-worth of projects has also been halted since Monday, according to estimates compiled by trade magazine Construction News. Sites affected including an NHS hospital in Liverpool, a £154 million build-to-rent scheme in Manchester, and a £100 million housing redevelopment project in Sunderland.
“The scale and cost of this are yet to be fully grasped,” Farmer said.
Carillion might not be the last household name to fall
Farmer’s highly critical report on the UK construction industry in 2016 identified shrinking profit margins and financial fragility as two symptoms of a broken industry which needed to “modernise or die,” and he warned on Thursday that Carillion’s collapse could be the first of several of the industry does not “overhaul itself.”
“This unfurling mess is further proof that the current business models and delivery methods used by the construction industry are not fit for purpose,” he said.
“Shrinking profit margins, a deteriorating skills base, widescale reluctance to embrace technology and increasing issues surrounding build quality mar the industry.
“The myopic focus on turnover, rather than improving margins and removing waste in the supply chain through efficiency and innovation, has now resulted in the collapse of an industry giant.
If the industry doesn’t take this as an opportunity to overhaul itself and grasp a real modernisation agenda, Carillion won’t be the last household name to fall by the wayside.”