Carillion’s collapse was an “accident waiting to happen” caused by an industry model based on wafer-thin margins and taking on ever-more risk, an industry figure has warned
Carillion has applied compulsory liquidation after rescue talks with banks failed over the weekend.
Mathew Riley, managing director of Ramboll and the new chair of the Association of Consultancy & Engineering (ACE), said the construction industry as a whole must use Carillion’s failure as a catalyst to drive lasting change and he called on the government to do more to ensure the sector performs.
“Public sector procurement is part of the problem and the way [Carillion] have sought to manage, share and transfer risk through the supply chain,” Riley said.
“For an industry that operates on wafer-thin margins, to take on more risk, particularly for high value contracts, was always a dangerous strategy.
“We need a more sustainable business model moving forward and the government needs to play a more active role in helping the industry to perform.”
Riley said the realisation that construction is facing a “broken” business model comes at a time when it is facing converging forces, including the need to increase productivity, uncertainty from Brexit, tackling the skills shortage and the opportunities presented by disruptive technologies.
“The failure of Carillion is a very sad day that brings uncertainty to a lot of people,” he added.
“The industry should look at this as impetus to drive positive change and firms like Ramboll and organisations like ACE will be there to play their part in ensuring our industry is fit for the future.”