Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Carillion Goes Bust, as Government Refuses to Bailout PFI Contractors Debt and Pensions Liabilities

Companies / Corporate News Jan 15, 2018 - 04:46 PM GMT

By: Nadeem_Walayat

Companies

Carillion 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.

Police Arrest Tree Protester on Meersbrook Park Road, Sheffield

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

http://www.marketoracle.co.uk

Copyright © 2005-2017 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 30 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in