Inspection and Regulation

16.05.18

Hospitals stalled by Carillion bust a result of 'recklessness, hubris, and greed', MPs say

Two major NHS hospitals halted halfway through building were a consequence of “rotten corporate culture” at the now-collapsed construction firm Carillion, a government-backed report has claimed.

A scathing Commons inquiry into the firm’s downfall found that its board members were ultimately responsible for the collapse due to “recklessness, hubris and greed,” leading to delays in the building of the £335m hospital in Liverpool and the £350m Midland Metropolitan Hospital in Birmingham.

The Work and Pensions and Business, Education and Industrial Strategy (BEIS) Committees found in their final report of the closure of Carillion – which held 19,000 employees in the UK when it went bust in January – that board members painted the company out to be better than it was, when in fact board members overlooked regulatory practices in a “relentless dash for cash, driven by acquisitions, rising debt and exploitation of suppliers.”

In its construction of the Royal Liverpool Hospital, to which the company was awarded a five-year, £235m contract, the report told of delays due to cracked concrete beams set to hold up the hospital.

A review commissioned by Carillion into the cracked beams was something to be credited in the view former CEO Richard Howson, who claimed that the company did not “just cover [the cracks] up.” Yet upon further review, Charles McLeod, director of the Hospital Company, said that five of the eight defective beams could have failed under the load of a fully operational hospital, which “could have resulted in unsafe working conditions and at worst, injury and loss of life.”

The collapse of Carillion also heavily affected the construction of the 669-bed Midland Hospital in Birmingham. The hospital, which is two-thirds built, had its progress stalled since January and is expected to require an extra £125m. It is now planned to be opened between 2019 and 2020.

Misleading investors and the painting of a false picture from board members led MPs to argue that the mystery of Carillion “is not that it collapsed, but that it lasted so long. Carillion became a giant and unsustainable corporate time bomb in a regulatory and legal environment still in existence today.”

The MPs added: “Even as the company very publicly began to unravel, the board was concerned with increasing and protecting generous executive bonuses. Carillion was unsustainable.

“But the problems that caused the collapse of Carillion were long in the making, as too was the rotten corporate culture that allowed them to occur.”

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