By Neil Patrick
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| The Yas Viceroy Abu Dhabi Hotel built by Carillion. Photo credit:Rob Alter |
When I started work on my book with Marcia LaReau, Careermageddon,
we did not have an agenda. Our view was that the evidence will take us where it
will.
But after three years research, even I was surprised where we ended up as we sought to discover the real destroyers of jobs.
But after three years research, even I was surprised where we ended up as we sought to discover the real destroyers of jobs.
Careermageddon is a politically neutral book. The conventional ‘wisdom’
about jobs from the left is that government must borrow and spend to create
jobs. Amongst the right it is that the free market is more efficient, therefore
tax cuts and business friendly policies are the best framework.
The trouble with the free market is that if government uses private contractors, it does not absolve itself of risk, because private companies act primarily in the interests of shareholders and investors. And this can lead to some pretty nasty outcomes for employees and customers.
The trouble with the free market is that if government uses private contractors, it does not absolve itself of risk, because private companies act primarily in the interests of shareholders and investors. And this can lead to some pretty nasty outcomes for employees and customers.
This week we have seen the unravelling of Carillion, one of
the biggest construction firms in the UK. It holds numerous government construction
contracts including the UK's high speed rail network expansion, HS2. I flagged this
three years ago here as an example of government spending folly.
Carillion is massively in debt. The debt burden is so great
that the future of the firm and around 20,000 UK jobs and a further 23,000
overseas jobs hang in the balance. It has a £900m debt pile and £600m shortfall
on its pension plan.
It is just the latest in a long and sorry catalogue of
failed businesses which are massively over borrowed to the point that even the
smallest shortfalls in revenues compound over time to become catastrophic.
The biggest threat to jobs which we identified in Careermageddon
is not technology. It’s not migrant workers. It’s not globalisation.
It’s debt. Personal debt, corporate debt, and government
debt.
Whatever happens to Carillion, the debt spiral will be even more compounded – it won’t be written off, it will just move and spread
elsewhere.
Which leads me to three simple conclusions. Government needs to
take greater oversight of the debt vulnerability of firms it contracts with.
Business needs to borrow less and invest more not in executive bonuses and shareholder
dividends, but in long term assets and debt reduction. And people need to
reduce their personal debt so they have greater financial resilience when disaster
strikes.
It might not be fun, but if you want to make a worthwhile new
year’s resolution, reducing debt is a much more worthwhile one than most that I have
heard.
