Carillion Goes Bust, as Government Refuses to Bailout PFI Contractors Debt and Pensions Liabilities
Companies / Corporate News Jan 15, 2018 - 04:46 PM GMTCarillion goes bust after Government decides not to bailout the private sector PFI contractor with tax payers money, unlike the £4 trillion banking sector liability bailout that the people of Britain continue to suffer the consequences of in terms of loss of purchasing power of real terms earnings as a consequence of inflation of the money supply and asset prices through quantitative easing of over £500 billion and through a myriad of other banking sector asset price boosting measures such as the "Funding for Lending" scheme amongst a dozen others.
Nevertheless, the Government refused to bailout Carillion that holds some 400 PFI contracts totaling more than £16 billion. The obvious reason is because Carillion is deemed NOT to be too big to fail unlike the banking sector that banked profits on the back of fictitious profits and then dumped its 'hidden' losses onto tax payers with the resulting consequences of a decade long economic stagnation.
So just because Carillion holder of £16 billion of PFI contracts across the UK was not bailed out does not mean the same would not be true if other PFI contract holders also went bust, especially if they are collectively the holders of larger contracts. For instance AMEY is the holder of a £2.2 billion contract for the city of Sheffield alone, let alone the value of contracts for the rest of the UK.
Whilst many may argue that Carillion was a special case, but the reality is that in terms of published accounts, Carillion's profits and turnover was deemed to be one of the better performing PFI contractors, banking profits of £155mln against a loss of £200mln for sector giant Balfour Beatty whilst Amey trailed far behind on just £23.6mln profit on turnover of £2.5billion.
As is usually the case the crippling factor is DEBT, Carillion's demise occurred not because it was not profitable, but that it could no longer service its huge and growing debt mountain which is the hallmark of PFI contracts and other corporations destined for bankruptcy. DEBT and PENSIONS liabilities are literally the corporate ticking time bombs under the hood of every major corporation other than the cash rich tech sector. From giant retailers such as TESCO, to the PFI contractors such as Carillion and Amey amongst a dozen others in this sector the critical factor is DEBT and Pensions liabilities that only a couple of weeks ago threatened to claim ToysRUs, which is the primary triggering mechanism for a large corporations ultimate demise.
Where Amey is concerned the unintended consequences of what is taking place in the city of Sheffield sees on a near daily basis vast resources deployed to fell a dozen or so trees each day, one of costs spiralling out of control that foretells the crisis that Sheffield's giant PFI contractor is potentially facing. For no corporation can turn a profit on a contract that requires upwards of 30 personnel to be deployed to fell a single Sheffield Street tree, the costs of which could easily exceed £10k in resources committed per DAY for just to attempt to fell a single street tree.
The following video illustrates one of the inherent flaws at the heart of PFI contracts. One of the lack of accountability between PFI contractors who remain focused on the terms of their contracts rather than the actual wishes of the people that results in ordinary people of cities such as Sheffield having had enough of unelected entities, dictating what should happen to their streets that results in direct action which sends costs spiralling out of control to far beyond any of the financial projections made at the time the contracts were signed.
The following video further illustrates what is happening on Sheffield's streets illustrates why PFI contracts are going bad as costs soar sending contractors into losses and debt due to penalties for failure to meet contractual liabilities that pushes the likes of Carillion into bankruptcy.
The bottom line Carillion may be the first major PFI contractor to go bust but it won't be the last due to the inherent flaws of rigid PFI contracts that are not able to adapt to what the people of Britain's cities actually want, which is why elected bodies such as Local councils came into existence in the first place, so as to express the settled will of the local people, against PFI contracts which effectively results in the outsourcing of local democracy to a deaf, dumb and blind PFI contractor that is wholly focused on the terms of the signed contract, rather than what the people actually want to take place in their cities.
Watch this space for the next big PFI contractor to go bust!
By Nadeem Walayat
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