Carillion, the second-largest construction firm in the UK, were proud of their commitment to support regional growth and small-scale suppliers. As part of this commitment, they directed 60% of project expenditure to local economies. Following the collapse of the firm, this positive multiplier effect became a significant, negative multiplier effect, particularly damaging to small-scale suppliers in the construction industry. The aim of this policy brief is to examine the consequences of Carillion’s demise, many of which are only now surfacing. One of the fundamental lessons that we can learn from Carillion’s collapse is about these ‘contagion’ effects. As we saw in the 2008 financial crisis, the businesses that underpin the economic health of the country are connected and strongly co-dependent. When a large flagship firm falls it brings down others. This does not mean we need more state intervention. But it does mean we need more intelligent state intervention. One of the fundamental lessons that the Government can learn from the Carillion episode is that it has a significant responsibility as a key customer, using public sector funds for public sector projects, to monitor the health of firms and assess the risks prior to issuing PPI and other contracts.
To download Part B of this policy briefing, please click here.
To read Part A of this policy briefing, click here.
The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI or the University of Birmingham.
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