Stand by the firms who serve us well
The Carillion debacle has been a story reported in much of the press over the past few months and one of the Parliamentary Committees I serve on has been involved in an inquiry into what happened.
The company collapsed in spectacular fashion in January of this year leaving both their private and public-sector clients high and dry. Subcontractors and staff were left unpaid and in an uncertain position. This has badly tarnished the reputation of the large outsourcing sector in the UK.
The inquiry found that the business model at Carillion was an unsustainable one which relied on bidding for work at prices that were cheap and ultimately lost money.
It is a basic requirement for anyone in business that you must cover your costs when setting a price. No-one can sell anything at £5 when it costs £6 to produce it. This is effectively what Carillion was doing and were doing it by exploiting their suppliers, buying more and more companies to hide this unsustainable approach and taking on more and more debt.
The board of directors who were meant to be in charge of the company were found to be clearly at fault. They ran the company extremely badly and must take full responsibility for what they did.
This unprofessional and unacceptable behaviour must be called out by everyone in Government and in business whenever it occurs. Outsourcing companies can do a lot of good, the hard-working staff at Capita in Stirling will tell you that, but when a company like Carillion fails in this manner the reputational damage to many excellent companies is significant.
There is a culture across parts of the corporate system where the same accountants from the‘big four’firms make huge amounts of money from supporting companies, then investigating each other’s work and again by dealing with the fallout after the company fails. There is too much focus on getting the numbers to add up and not enough on whether the company is treating its employees, its contractors and its customers right. I was in business for many years and know well the need to keep your customers happy, your workforce motivated and your board of directors informed rather than chase the quick easy buck.
Most companies do this. They make the investment, they build up their customer base, they treat their workers right and by doing so they build a long term profitable model. It requires patience and skill as well as imagination and flair. There is not enough celebration of these grafting companies who we take for granted and a bit too much focus on the high profit headlines that grab people’s attention.
I hope we can all do our bit to support our local, hardworking businesses. As reported in this paper last week, many of the those in the Springkerse Industrial Estate are suffering from lost trade due to the Kerse Road bridge closure. We have also seen coverage of just how much our city centre is struggling with well established businesses finally calling it a day. Less footfall, online competition and the damaging approach to business rates and their appeal by the Scottish Government are all factors.
These are the companies run by grafters who have put in investment and worked for years to build their loyal customers. They have served many of us for many years and we should stand by them and use them whenever possible or, as we have just seen, they will disappear.