The government’s privatisation policies, after the collapse of Carillion, one of the government’s biggest contractors, was the major focus at today’s Prime Minister’s Questions (PMQs). Labour leader Jeremy Corbyn accused the government of being “clearly neglectful.” He reminded the prime minister of the fact that,” as of today, over 20,000 Carillion workers are very worried about their future.” 

“The government have been handing out contracts, it’s the government’s responsibility to see that Carillion is being properly manged,” Corbyn said. After having listing the three profit warnings and shares falling by 90%, he asserted: “It looks like the government were handing Carillion public contracts either to keep the company afloat—which clearly hasn’t worked—or it was just deeply negligent of the crisis which was coming down the line.”  

Theresa May responded to Corbyn’s question about the government being neglectful in a manner that seemed petty, by saying she would not answer him because he had not concluded with a question mark. She also said the government was simply another of Carillion’s “customers.” In this, she missed a superb opportunity to renew her election promise to crackdown on corporate excess. When Corbyn asked her if she could “assure the House that not a penny more will go the chief executive or directors?,” May simply responded by saying a number of facilities manager contractors have made agreements, ensuring workers are paid and the official receiver investigation will fast-track looking into bonuses as well as previous directors’ actions and that will also recover payments. 

Corbyn concluded his statements powerfully, urging May to “show the door” to corporate failure and attacking the government for what he says isn’t an isolated case of government neglect, but rather, a broken system. “As the ruins of Carillion lie around her, will the prime minister act to end this costly racket of the relationship between government and of these companies?” In her response, May spoke of the government ensuring public services continue, making sure that workers and taxpayers are protected, but—more memorably— she criticised Labour for its own involvement in Carillion, saying the party has “turned its back on investment, on growth and on jobs.” This was broadly seen as her weakest PMQs performance to date.

Other criticism of the government

Liberal Democrat leader Sir Vince Cable told the Financial News that hedge funds had known of Carillion’s difficulties in paying contractors since 2013, when they had begun selling their shares in the company. “Theresa May just didn’t have the people in place who were skilled and adept enough to spot the clear red flags being waved many, many months ago. All the evidence shows the government did nothing during this period,” Cable said.

Frances O’Grady, the TUC general secretary told the business secretary he should set up a taskforce of representatives from unions and companies in Carillion’s supply chain, to help those who are most at risk. “It is self-evident that, had the government been prepared, we would not have been in this situation,” O’Grady said.

Is Interserve next? 

Interserve is another company that outsources service jobs to the UK public sector, providing services including healthcare, construction and probation. The company employs 80,000 workers worldwide and has an annual turnover of £3bn. Like Carillion, the company issued a profit warning last year.  The firm has struggled to maintain profits after the increase in the national minimum wage and it had to absorb losses of approximately £450m in 2017, after delays caused the firm to be terminated from renewable waste projects. The company’s future was said to be in doubt in October, after Interserve issued a profit warning and also warned that it could breach the conditions it had agreed to with its lenders.

Interserve’s shares fell by 10% after the Financial Times (FT) reported a government official saying: “Ministers are very worried about Interserve, but the team is small and low-key as they are not wanting to unsettle.” Another government source told FT that while Interserve is being monitored, this is not unusual, since: “There are regular discussions with all of our 30 strategic suppliers.”

The Cabinet Office’s response to the FT report confirmed that the government monitors the “financial health of all our strategic suppliers including Interserve.” They repeated the phrase, “regular discussions” and improved on industry analysts’ similar views, stating that Interserve was not in the same risk as Carillion had been, by saying: “We do not believe that any of our strategic suppliers are in a comparable position to Carillion.”

Innocent victims

The CEO of the Federation of Master Builders, Brian Barry has warned that if Carillion projects are put on hold, many sub-contractors will become “innocent victims.” Barry explained that Carillion relied on sub-contractors to perform most of the work. “Now we are in a very precarious position where thousands of workers don’t quite know what their position is and often they can’t get on site.” 

Around 30,000 sub-contractors are believed to be owed money by Carillion, which was typically paying debts after holding invoices for four months. The official receiver handling the liquidation has said that firms owed money should expect to receive a few pence for every pound they are entitled to, which has forced some of these businesses to begin laying off staff.

Workers not thrown to the wolves

The Insolvency Service has announced that work on construction sites formerly run by Carillion are, in fact, now on hold while decisions are being made regarding these project’s futures. This means those thousands of workers the federation of Master Builders was concerned about, will know only that they need not attempt to return at this point. How long will they wait before they know if they have jobs to return to? This will be a very difficult time for many of them.

By contrast, work on most of the failed firm’s private sector service contracts will continue until new suppliers have been located. Theresa May’s spokesperson has said that more than 90% of the staff working with private sector companies will continue to be paid in the short -term, although their future prospects might change after the official receiver has completed the liquidation. The news that around 8,500 people won’t be laid off today confirms May’s statement to parliament in the PMQs. 

 Also, banks are offering businesses “emergency support,” according to UK Finance, the union representing the industry. UK Finance’s managing director for Commercial Finance, Stephen Pegge said: “Lenders are contacting customers and, where appropriate, are putting in place emergency measures, including overdraft extensions, payment holidays and fee waivers to ensure those facing short term issues can be helped to stay on track.”

Although Carillion workers and the 30,000 sub-contractors who performed the lion’s share of the work still face many challenges ahead. However, the situation appears to be improving over the course of the day. Earlier, Tim Roache, GMB union’s general secretary had urged the government not to throw Carillion workers “to the wolves.” Urging other companies who worked on projects beside the failed firm to “take on Carillion worker with decent terms and conditions,” Roache insisted the process would take more time than the government suggested. He called the government’s suggestion that workers should contact Jobcentre Plus if they hadn’t been hired within 48 hours, scandalous.