The collapse of construction giant Carillion, which threatens thousands of jobs, was an accident waiting to happen says Professor Karel Williams from Alliance Manchester Business School.
Talks between the firm, its lenders and the government have failed to reach a deal to save the UK's second biggest construction company. However Prof Williams said the root of the crisis was that Carillion had turned from a construction company into an outsourcing conglomerate.
“With outsourcing you have to continually bid for new contracts and the stock market expects to see continuous growth. But sooner or later you take on a contract that makes huge losses and the operation can’t sustain those losses.
“Then problems can arise when you move past being a specialist outsourcer. Many conglomerates just churn through contracts and move into areas they don’t understand, until their luck runs out. This was an accident waiting to happen.”
Carillion employs 43,000 workers, including nearly 20,000 in the UK, and is one of the UK government’s biggest contractors. It builds, maintains and operates hospitals for the NHS, manages nearly 900 schools, and is also involved in major projects such as the HS2 high-speed rail line. Its liquidation means the government will have to provide funding to maintain the public services run by the company.