How do you solve a problem like Carillion? It turns out the answer is: you don’t. The government has declined to bail out the troubled construction firm, and the banks declined to continue extending them credit. The firm has collapsed and gone into liquidation. (It hasn’t gone into administration because it has no assets to sell.)
The Telegraph estimates it will leave the Pension Protection Fund on the hook for at least £800m and the knock-on effects could drive small and medium-sized businesses that work for Carillion over the edge too. It also leaves the company’s 48,500 employees, 19,500 of them in the UK, out of work, and the true figure is likely to be higher when you include the many contractors and freelancers the firm itself employed. The British government will also have to pay to keep the government services that Carillion ran going in addition to money already paid out to Carillion.
What about the political fallout? Chris Grayling has a big target on his back as his department gave Carillion £2bn worth of contracts after its first profit warning. Labour pressure and lingering Tory discontent over the reshuffle could turn into a perfect storm for the Transport Secretary. And for Jeremy Corbyn it’s a golden opportunity to advance his big argument about the costs of privatisation.
That in of itself is interesting: one of the strengths that Ed Miliband had over Corbyn was his ability to make the political weather over crises like Carillion. Labour’s quick and painless mini-reshuffle does show that the Labour leader is getting better at playing the game of politics. How and if Labour capitalise on Carillion will show us the extent of the improvement.