The Carillion accounts for 2016 showed total liabilities of £2bn. When the Liquidator went in in early 2018 it was found the total liabilities were £7bn…………so much for experts! By 2011 the OECD said the Eurozone’s debt crisis was the greatest threat to the world economy. As the collapse and financial mismanagement continued the British Government awarded Carillion more State sector contracts. As the EU crisis worsened after the launch of the Euro in 1999 Croatia, Estonia, Hungary, Latvia, Lithuania, Malta, Slovakia, Slovenia and Poland all joined.
Just as Consultants to the EU, EU Commissioners, civil servants and MEPs enjoyed greater rewards, salaries and expenses while EU economies collapsed, so Carillion raised Directors bonuses and paid £6.4m to accountants, consultants and economic advisers a few days before asking the British Government for a £10m loan. It was refused and the company went into liquidation with 1500 job losses.
The “experts” advising and auditing large companies are as incompetent as those advising the European Union rulers in Brussels.
POLITICIANS ATTACK THE FAILURES THEY CREATED
There is nothing politicians like more than attacking the failed economic and political structures they created (or allowed to grow).
A House of Commons Committee said there was a “disconnect” between what Carillion directors told MPs and the information from shareholders:
“On the one hand, the Carillion directors told us all was sunny” until a major contract in Qatar went wrong.
(EU Commission telling people and Parliament the EU and Eurozone were growing bigger – until mass unemployment and crippling taxes hit)
“On the other hand, investors were fleeing for the hills, and it appears those who looked closest ran fastest,” (Frank Field MP)
(suicides and mass migrations from Greece, Spain, Portugal, refusal of banks to fund bankrupt EU members)
BUILDING BIG POWERS
Carillion was created in July 1999, by a demerger from Tarmac, a distinguished and successful British company which was founded in 1903; the new company included the former Tarmac Construction contracting business and Tarmac Professional Services. Tarmac Construction, Wimpey Construction, Cubitts, and Mitchell Construction all merged in 1999 to create Carillion.
The EU, founded in 1957 with only 6 members, now has 28 members. It also grew by “acquisition” – the acquisition of countries which thought they were joining a powerful group which would be more successful because of its size. It was certainly more successful in creating unemployment – 25m at its height – and in piling on unrepayable debts in Ireland, Spain, Greece and Italy!
By further acquisitions Carillion absorbed a Rail company, a management services company, the Planned Maintenance Group, the Mowlem support services company and the well established British company Alfred McAlpine. In 2008 Carillion bought Van Bots Construction in Canada for £14.3 million and Eaga an energy efficiency company.
In 2012 it acquired a 49% interest in The Bouchier Group, a company providing services in the Athabasca oil sands area, for £24m. Then, in October 2013, the company bought the facilities management business of John Laing.
Just as the EU (EEC) started, officially at least, as a “common market” for the supposedly free trade of goods and services so Tarmac was originally a construction group. By the time of the Carillon bankruptcy it had businesses covering:
Homes for Military personnel
Running Battersea Power Station
Meal services to over 200 schools
Maintaining 50 Prisons
Providing 11,500 hospital beds
A 1.4bn joint venture contract for the HS2 rail line
Similarly the EU gradually accrued ever more areas of political, social and fiscal control and customs control of member states. It turned all the nationals of members states into EU citizens and developed common security and defence policies. It developed “regional policies” which forced the regions of the nation states to beg for funds from Brussels – a centralising ploy taken from Hitler’s Europe!
This was similar to Carillion forcing all its companies’ customers to pay the Company Headquarters who would then hand the money to its subsidiaries doing the actual work. In fact they were paid by the hospitals, the army, the schools etc promptly but then lengthened their payment terms to the companies to 120 days. So for months the companies doing the work had to finance their working capital and bank loans while Carillon at the centre pocketed the money – or spent it on acquiring new companies and paying large dividends to shareholders – who naturally then thought the company was worth more than it was!
SOME FIGHT FOR INDEPENDENCE
In August 2014, Carillion failed to take over the highly successful construction company Balfour Beatty valued at £2.1 billion. That company survives today – unlike all the above mentioned which went down with the Carillon bankruptcy.
Countries which refused to join the EU like Liechtenstein, Norway and Switzerland continued to get richer – although they are repeatedly bullied (like Balfour Beatty before they fought free of Carillion) into surrendering aspects of their sovereignty and in the case of e.g. Norway paying large sums in order to trade freely with the EU’s “Single market”. A kind of protection racket!
Rudi Klein, head of Specialist Engineering Contractor, an umbrella group representing suppliers to the construction industry, said Carillion outsourced virtually all its work. Of course! They had no time for actual work – they were too busy acquiring new companies, paying themselves vast salaries and excessive dividends.
So it is with the EU who although ultimately controlling so many social, fiscal, political policies as well as farming and fishing and trade negotiation for their new “country called Europe” most of the day to day work is done within the individual members states!
Klein said the government knew of Carillion’s reliance on sub-contractors, but continued to award the company lucrative work despite growing concerns about its finances. “It’s that supply chain who is going to bear the massive loss,” he said.
Just like the EU. Despite warnings from their own experts and from political opponents (mainly outside parliament) the British and other member states continued to pay billions in budget contributions to the EU even as virtually every year the accounts were not signed off by auditors because of endemic corruption especially in the award of agricultural grants.
MISLED BY POLITICS
The managing director of Flora-tec, Andy Bradley which was owed £800,000 by Carillion for landscaping services when the company collapsed shows how small companies are misled (as are small countries) by what Governments – and supranational Governments – do. They naively believe that the State, the Superstates and big corporations represent “safety”. Bradley explained how he was suckered:
“The government actively encouraged businesses like mine… to get involved in public sector contracts, to make sure the little guy got a slice of the pie.
“When Carillion started to get into trouble last year we were considering that we would scale back our involvement with them.
“However… the government continued to give them billion-pound contract after billion-pound contract and that said to me, as a small supplier, that the government had done their due diligence.
“We were following the government lead… only to be given a sucker punch.
“I had to make 10 people redundant yesterday. That’s 10 people with mortgages, car loans, all that stuff. It’s an absolute disgrace.”
Similarly the small country – Greece – was enticed by grants (doled out without much circumspection by Brussels) into believing that not just EU membership but Euro membership would be wonderful! So with the help of the merchant Bank Goldman Sachs they fiddled their accounts so that they qualified to enter the Euro. The result was one of the greatest peace time disasters to befall any country in history:
Youth unemployment of up to 60%, overall unemployment of 25% a massive 25% fall in GDP over 7 years, the flight of hundreds of thousands of its youth, record suicides and 200bn Euros of debt which can never be repaid.
When they ran out of money the EU, France and Germany insisted that the Greeks take on more debt. For the good of the Greeks? No – to repay their enormous debts to the French and German banks!
If you want a brilliant expose of the corporatist Statist corruption of the EU and its dealings with Greece read “Adults in the Room” by the former Greek Finance Minister Yanis Varoufakis. Ironically like Andy Bradley’s naivety about the British Government and the corporate power of Carillion above, Varoufakis was equally naive about the true nature of the EU juggernaut except that (not being personally responsible for any losses himself as a politician with an academic job to go back to) his naivety went on and on and on, as Greece went down and down and down. His overt threats to leave that Euro were only matched by his covert desire to stay in. And while he saw the horrors of the destruction of Greek democratic sovereignty he continually sought “European solutions” and “European solidarity”.
DISGUISED FUNDING
As Carillion’s finances got worse it turned to less open sources of finance – the German Schuldschein market – debt instruments which tend to be less expensive and do not need to be listed or registered on a stock exchange (meaning there is no need for a lengthy prospectus!!).
As a form of private placement, borrowers can ensure such a transaction remains confidential – with minimal or no publicity if desired. In other words easier to hide from existing lenders who might otherwise get worried! No wonder British banks, when they woke up, ended up writing off £1bn from their lending to Carillion!
There was also the advantage for a company in such funding since it was 18 months or two years before the information was published! That would explain partly the horrendous growth in Carillion’s liabilities between its last signed off accounts and its liquidation.
Another form of disguised funding was used to help pay its subcontractors – the Early Payment Facility. Its suppliers could take their invoice to one of Carillion’s lenders and be paid. The bank took a fee, and Carillion no longer owed the subcontractor, but the bank. This sum was not included in the published debt figure, but was in the accounts under a different heading!
Similarly as the commercial banks would no longer lend to major country debtors like Greece and Spain so the European Central Bank in Frankfurt bought those countries’ debts instead. Although not secretive it did provide undeserved comfort for State borrowers to know the decision about their finances were now political rather than commercial and, like the UK Government awarding contracts to a bankrupt Carillon, so the ECB standing behind bankrupt countries was a misleading comfort for companies dealing with e.g. Greece or Spain.
Of course the EU and its central bank in Frankfurt were getting a political return for their risky lending to bankrupt member states – the power to dictate to the politicians of that country and the power to obtain major infrastructure and military contracts – as Germany and France did in Greece.
BIG MEANS POWER, NOT SUCCESS
So there we have it! Big Business or big Government or big supranational organisations are all irresponsible and disastrous because:
they are remote from the real world,
they are ignorant of what is happening “on the ground”,
they are run by bureaucrats/corporatists not responsible voters/owners,
they use the wealth created by real businesses/countries to create political power structures which in turn destroy those companies and countries,
they override economic sense for political power,
they always react too late and spend their time covering up (by never ending re-financing or State aid or re-writing laws)
unlike entrepreneurs and smaller businesses responsible to the consumer they cannot accept their failure so they make everyone else pay for it
