Vince has been speaking about the Carillion crisis. The FT reports:
The Lib Dem leader’s intervention suggests the crisis at Carillion is about to become highly political; Sir Vince claimed last November that the government was “feeding” contracts to the company to try to keep it alive.
On Friday lenders to Carillion dismissed the company’s rescue plan and urged Downing Street to intervene.
But ministers will face fierce political criticism if they have to bailout a company which continued to receive major public contracts — including on the HS2 high speed rail line — after it issued a profit warning last July.
The government would also have to comply with EU state aid rules, but Sir Vince said that in the first instance the private sector should take a hit.
“The shareholders of the company are going to have to take a loss,” he told the BBC. “The creditors, the big banks who hold most of this debt, will have to write off some of it, perhaps replace some of it with shares.”
You can watch his BBC interview here.
He’d earlier said on Twitter:
.@Carillionplc collapse. Why did co get public sector contracts for @HS2ltd @networkrail Corby-London electrification #defence #schools after profit warning showed high risk? Too big to fail and failed.
— Vince Cable (@vincecable) January 12, 2018
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26 Comments
I believe that Carillion is massively involved in HS2. Perhaps now is the time to pull the plug on this ill conceived vanity project and spend the funds on upgrading other lines. The only NEW line we really need is a high speed link up north. I think it’s called HS3.
Another example of super-sized, too big to fail, Corporatism at work.
Well said Vince Cable … and John Marriott re abandoning the London-centric HS2 and the greater benefits of HS3 to the north of England and to a rebalancing of the wider national economy.
HS2 comes “up north”. Just saying.
Frankly, John Marriott, this Govt has already “pulled the plug” (accidental or deliberate pun?) on enough electrification and High Speed projects. This is not a “vanity” project, it is part of a wholesale upgrading of our network to link with / act in tandem with other railways both in Europe and around the world. Failure to build these lines will also mean failure to attract passengers back from short haul airlines, and in both senses develop a more sustainable transport system. That’s completely aside from the declared objective, of increasing railway capacity!
I’ve got to admit that has a frequent rail user, I do not support the endless disruption electrification would bring. If they are pulling the plug, good.
Journey Time Crewe to London West Coast Main Line 1hr 30 min
Journey Time Crewe to London HS2 55min
But who wants to go from Crewe Station to Euston.
I used to travel from home to Putney on a regular basis.
Journey Now HS2
Home to Crewe 25min 25min
Crewe to Euston 90min 55min
Euston Platform to Putney office 60min 60min
TOTAL 175 min 140 min
Where is the great saving to attract people from airlines. True the saving from Manchester would be more, but so would the time taken to get to the station.
Yes we need more capacity, Yes we need better cross country services in the North and Midlands but we do not need expensive high speed vanity projects to save a few minutes from station to London station time.
Vince is quite right on this one but he must be careful not to be critical of every major corporate merger or insolvency, especially as he was Business Secretary for five years and arguably did not alter the landscape much at all. It might work politically, but it ruins his credibility with business commentators.
If you only have so much money HS3 and investing in the rest of the network including opening old lines makes more sense.
For Glen
The electrification infrastructure that enables electric trains to draw their power from the national grid offers many advantages, most of which are due to trains not requiring diesel engines. For the foreseeable future, diesel remains the only credible alternative traction power to electrification. For the same weight, diesel fuel stores fifty times the energy of a modern battery. Hence battery-powered vehicles can only be suitable for short distance services.
Diesel engines have obvious problems. They are expensive to buy and maintain, as well as being heavy, and so require additional track maintenance, especially at high speeds. The power output of a diesel engine is limited by its rating. Traction power is further reduced as a diesel engine also has to supply the train’s hotel load.
https://www.railengineer.uk/2017/10/24/electrification-benefits/
So your desire to avoid electrification because it causes disruption is counter intuitive, it actually in the long run reduces track maintenance and Diesel are slower ( I don’t think I need to point out which are greener). What was that bring back steam.
Whilst I fully support Vince in that the banks and Carillion’s shareholders need to take a hit on this one. Given what we are hearing about the government being overstretched handling Brexit, I doubt the government has either the capability or capacity to step in and thus we can expect there to be a fudge and Carillion gets bailed out. I think the fudges that characterised the UK taxpayer bailing out the banks in 2008 gives some idea of how things will look, thus expect the UK government to take over the bank loans, become a shareholder and Carillion’s management continue as if nothing has happened.
Unfortunately, this will mean that the government will avoid a golden opportunity to renegotiate many contracts and to place them with smaller businesses – in many cases simply cutting out the front-man and placing the contract directly with the sub-contractor Carillion used – increasing government spend with smaller businesses is supposed to be government policy…
So your desire to avoid electrification because it causes disruption is counter intuitive, it actually in the long run reduces track maintenance and Diesel are slower
Actually, it isn’t in the “long run”, the electrification of the St.Pancreas to Sheffield line had a fully costed business case (unlike HS2/3 et al); the savings from electrification from reduced track maintenance, fuel costs and fleet costs, meant the total project cost would be paid back in 8 years! Yet both the Coalition and the current government have failed to back this project…
It’s on this sort of issue that I feel proud to have an authoritative leader like Vince, surely head & shoulders above anyone else in Parliament?
Glenn, have you ridden on the railways in Europe? If you had you wouldn’t mind the temporary disruption caused by electrification.
Personally I’d like to see the SW – NE route from Plymouth – Bristol – Birmingham – Derby – Leeds electrified, but as it’s no where near London I won’t hold my breath.
HS2 would make more sense if it linked to HS1 and allowed trains from Leeds, Manchester and Birmingham to run direct to Paris, Brussels and beyond. Spurs to regional airports and Heathrow to allow people arriving from outside Europe to take the train rather than a connecting flight into Europe would also be potentially useful. This Heathrow spur would also allow passengers from outside London the option to get to Heathrow by high speed rail: again useful if Heathrow remains the main hub airport. A spur into Euston might be a useful add on. At present the whole HS2 project is just an exercise to benefit London, not the UK as a whole, which together with the price makes two good reasons to oppose it.
Tony Greaves. Perhaps your comment is in jest. If not I think if you lived in Glasgow, Edinburgh or Newcastle upon Tyne you might take a different view on how far north HS2 goes.
For Yoeville Yokel, Frankie and Roland
I travel by train a lot. The Train services of Europe, “temporary delays”, better in the long run and costs paid back in 8 years are not going to get me from A to B on the days in the week I need to get from A to B.
I had shares in Carillion up to the profit warning last summer when I sold them. I lost some money. That’s the way it goes.
Vince is quite right to be cautious about a bailout.
Gone down the tube altogether…
https://www.independent.co.uk/news/business/carillion-latest-updates-liquidation-full-statement-contractor-a8159376.html
Private sector co’s with govn contracts have a long history of rip-offs and corruption based on the premise that they can make, say, five percent return on capital which just encourages them to pad out the overheads and costs (so that the turnover is bigger and hence the 5 percent take is larger). You have to bring in the forensic accountants to look into the affairs of the directors and sub-companies to see where all this tax-payer money has gone and how they ended up in such a mess as usually getting these kinds of contracts is akin to being handed your own money printing press. May actually be that the govn, for once, has been getting some value out of private co’s and such a shocking state of affairs to the private sector may have blown them apart (I think the same happened to Marconi back in the distant past).
Anyway, now liquidated and the good bits to be sold off whilst the govn promises to finance the essential public sector bits for the time being.
Someone from the engineering federation on TV pointing out that Carillion did not actually do any of the work, they got govn contracts and then subcontracted it out, so there seems to be a layer of waste even before you look deeply into things! The spokesman was annoyed that the govn was doling out these contracts rather than going direct to the cos that do the work!
Yet more unravelling of the post-Thatcher consensus on the alleged benefits of handing vital services to “cost-effective” and “efficient” private companies.
As it appears that Carillion is a multi-national company, would it make sense for the UK alone to bail it out? Is there an EU position on this?
Carillion are a conglomerate with big interests in the UK and (surprisingly to me) Canada, with much the same sort of Govt , Provincial and local govt contracts, highway, schools, hospitals in both countries.
Suspect many a town hall, including Labour ones, will be getting worried about some basic service provision over this, as well a Whitehall.
Glenn “I travel by train a lot. … better in the long run and costs paid back in 8 years are not going to get me from A to B on the days in the week I need to get from A to B.”
I take it from this that much of your travel is: at night, at weekends and during the holiday shutdowns?
Yes, unexpected disruptions are problematic, however, when for example Euston’s ‘throat’ had to be totally renewed, the disruption became normal and you simply adjusted to allow for the fact that a sub-40min journey would now take 1+ hours. I consoled myself in knowing that having purchased a monthly session ticket, most of the price would be refunded to my bank account due to sub-standard levels of service, plus during that period I managed to read rather a lot of books…
Roland.
Thank you taking the time to answer me. However, it was just an offhand comment about me being personally pleased that electrification was being scaled back.
Anyway, cheers.
Carillion has gone, and the minister at the head of the list for bad decisions is our old friend Grayling. This is no surprise as his history shows him to be the most error prone minister of them all. Almost everything he touches collapses.
It is a sad reflection on May’s leadership that she feels the need to keep this incompetent minister on board
Glenn – I think the issue with the government rail plans is that they seem to have lost the ability to manage a portfolio of projects and so are doing none properly… It would be nice to think that the monies and effort currently going into HS2 would be redirected into sorting the current network out. This includes such things like electrification and the timely completion of lines such as the East West Rail Link (formally known as the Varsity Line), but that would require an injection of commonsense into Westminster…
HS2 does not go to Glasgow, Edinburgh or Aberdeen.
HS2 doesn’t go anywhere.