Carillion: The Collapse of a Construction Giant

Background

Carillion was one of the UK’s largest construction and facilities management companies, with contracts spanning hospitals, schools, military bases, rail infrastructure, and major public-private partnership (PPP) projects. Founded in 1999 as a spin-off from Tarmac, the company rapidly expanded through acquisitions and aggressive bidding for large government contracts.

At its height, Carillion employed around 43,000 people worldwide and managed a portfolio worth billions of pounds. Its apparent strength in securing long-term, high-value contracts made it a trusted partner for both public and private sector clients.

What Went Wrong

Beneath the surface, Carillion’s growth was fuelled by razor-thin profit margins, over-reliance on debt, and overly aggressive revenue recognition. The company frequently underbid on major contracts to win tenders, banking on optimistic cost forecasts and future renegotiations to make the projects profitable.

Large-scale projects began to experience delays, cost overruns, and disputes, locking up cash and eroding profitability. By 2017, Carillion was facing more than £1.5 billion in debt, with a pension deficit exceeding £800 million. When several major contracts failed to deliver the expected returns, the company issued profit warnings, triggering a collapse in investor confidence.

In January 2018, Carillion entered compulsory liquidation. The collapse left thousands unemployed, delayed key public projects, and created ripple effects throughout the construction supply chain.

What They Could Have Done Differently

Implement disciplined bidding practices – Avoiding underpricing just to secure contracts and ensuring realistic cost and risk assessments.

Strengthen financial controls – Better forecasting, tighter debt management, and early warning systems for project performance.

Diversify project portfolio risk – Balancing high-value, high-risk contracts with smaller, stable-margin projects.

Improve governance oversight – Ensuring the board actively challenged overly aggressive growth strategies.

Carillion’s story is a stark reminder that unchecked expansion and poor financial discipline can sink even the biggest players in construction. At Clarke Consulting, we specialise in helping construction firms avoid these pitfalls by implementing robust operational, financial, and risk management frameworks.

We work with leadership teams to:

• Analyse bidding strategies for sustainable profitability

• Strengthen project monitoring and cashflow control

• Identify and mitigate risks before they escalate

• Improve governance and decision-making processes

Contact us today to discuss how we can help your business grow sustainably — without the hidden risks that lead to collapse.