Osborne employers make a mint out of Carillion collapse
THE FUND manager that pays George Osborne £650,000 a year for one day a week has been one of the biggest winners from the collapse of Carillion.
As an adviser to BlackRock, the former Chancellor may have questions to answer after it emerged it is among a group of investors to have made millions from Carillion’s demise.
If he has shares in BlackRock, the world’s largest fund manager, then he is set to personally benefit from last week’s liquidation, which has put thousands of jobs at risk.
Mr Osborne has sought to distance himself from the troubled construction giant. The newspaper he edits last week ran a leader column criticising the Government for awarding Carillion £1.3billion in contracts after it issued its first profit warning in July last year.
The editorial read: “Why has the state found itself so dependent on a few very large outsourcing firms?
“The failure to use a variety of smaller, mid-size companies undermines innovation and leaves services hostage when things go wrong.” But when he signed off a Carillion contract as Chancellor in 2014, Mr Osborne declared: “It’s great to see successful companies like Carillion winning contracts around the world.”
After crisis talks between Carillion, its lenders and the Government failed last weekend, shares in the FTSE 100-listed company were suspended, creating a windfall for investors with short positions in the stock.
When a company is delisted and goes into administration, the shares become worthless, so the short position is settled at zero. This means the hedge fund does not have to return the worthless shares to the lender, but still holds the cash from the initial sale of those shares.
BlackRock holds the third largest short position of Carillion’s shares – at 1.95 per cent after Kairos Investment Management (2.11 per cent) and Rye Bay Capital (2.02 per cent). It is not known when any of these investors first shorted the stock and BlackRock has declined to comment. Announcing Mr Osborne’s appointment in January last year, BlackRock’s chief executive Larry Fink said: “George has a unique and invaluable perspective on the issues that are shaping our world today.”
Remainers had blamed Brexit for Carillion’s collapse but the Sunday Express has learned the company carried out a preReferendum risk assessment, concluding that business would not be affected by Britain leaving the EU.
Eloise Todd, CEO of the anti-Brexit organisation Best for Britain, last week tried to make political capital out of the failure, describing it as “the first Brexit economic scalp”.
But a statement posted on the company’s website in July 2016 read: “Carillion has no significant operations in Mainland Europe and prior to the referendum we undertook extensive work to assess the possible impact on our business of a vote to leave and we have put in place robust plans to manage this outcome.”
Financial experts have blamed mismanagement, heavy debt of around £1.5billion, onerous pension obligations and delays in collecting cash from clients –- not Brexit.