Carillion PLC
Once the UK's second-largest construction and facilities management company, Carillion collapsed spectacularly in January 2018 - one of the UK's largest peacetime corporate failures.
Once the UK's second-largest construction and facilities management company, Carillion collapsed spectacularly in January 2018 - one of the UK's largest peacetime corporate failures. The extinction was rapid (six months from profit warnings to liquidation) and systemic (£7 billion in contracts vaporized, 20,000 jobs lost, thousands of suppliers unpaid).
Carillion was created in 1999 through demerger of Tarmac's construction division, with heritage tracing back to the 1800s. The company grew aggressively through acquisitions, holding 420 UK government contracts by 2016 with £5.2 billion annual revenue.
Carillion operated on razor-thin margins (1-2%) using high leverage and aggressive accounting. When contract delays, cost overruns, and credit tightening occurred, the business model became unviable overnight. Parliamentary inquiry condemned directors for 'recklessness, hubris, and greed.'
Cautionary Notes on Carillion PLC
- Operated on 1-2% margins with high leverage - no room for error
- Aggressive accounting masked structural unprofitability
- Optimized for low interest rates and lax oversight that reversed