Last month Carillion, the United Kingdom’s second-largest construction and outsourcing firm, went into liquidation. It employed 43,000 people and had 2017 revenues of 5.2 billion pounds (7.4 billion dollars). The company was delivering the high-speed London to Birmingham rail line, the Royal Liverpool Hospital and the Qatar World Cup, as well as facilities management and rail and road transportation services. The fall-out is shaking government and public confidence in working with the private sector and lessons from the liquidation will inform future public-private partnerships (PPPs).
Governments will tighten up procurement rules in the wake of Carillion being awarded contracts after issuing profit warnings.
Insurers underwriting projects may raise capital requirements; outsourcers who are effectively self-insuring might face similar pressures.
The combination of long PPP contracts and the risks quickly erode profit margins, leading to more considered risk pricing and raising costs.
Government budgets are likely to remain under pressure across the world, slowing the outsourcing market.
