News and Comment from Roy Lilley.

The tectonic plates are shifting.  We don’t need a seismic geologist.  We need a bit of common sense.

Warnings are coming thick and fast.

They started with care home provider, Four Seasons who are struggling with £540.2m debt, on top of difficulties with agency staffing costs, post-Brexit exodus of staff across the sector and local authorities cutting their care home expenditure.

Much worse, Carillion.  Their predicament… well rehearsed.  

As a result their customers have had to make gargantuan efforts to keep the show on the road, making sure yer granny got her dinner and the lavatories kept clean.  To say nothing of the operating theatres.  There is still a question over some of their hospital builds.

In the background, Virgin.  The buck stops with Branson and he freely admits his contracts make no money and in an act of admirable benevolence keeps the show on the road by dipping into his back pocket.  Thank you, but this is not a business.  It’s a hobby for a rich man.

As Private Eye reported: 

‘Virgin Care Companies, mainly Virgin Care Ltd and Virgin Care Services Ltd have liabilities of around £28m.  Most of what assets the companies have are ‘intangible’ in the form of technology that Virgin Care has developed…. They admit they don’t expect profits in the foreseeable…’

And, they got imbroglio with commissioners in Surrey and ended up in court.  

As a general observation; suing customers is never a good idea, particularly if you need to keep doing business with them, to get your liabilities down…

And now, we have Capita.  Like Carillion they have been posting profits warnings.  Capita shares have plummeted by 40% and they are hoping to prop the company up with a new share issue, valued at £700m, to buy off their debts.  Good luck with that.

Capita does a shedload of stuff across government and with the NHS.  A shedload of stuff that regular readers will know has often gone wrong… to the detriment or frustration of GPs, practice managers, junior doctors, Trust administrators and at arms length, patients.

A Cabinet Office spokeswoman said as a “strategic supplier” Capita was always monitored by the government.  

They are not monitored, they are spectated upon!  

When the two ends don’t meet the middle, when a company needs a shilling and it only has eleven pence, when the people lending the money say, thanks but no thanks… all the monitoring in the world won’t change the outcome.

When they need money the temptation; give them another contract, tide them over.  Fingers crossed.

Companies will say; we can trade our way out of the problem.  Every small business has said it to every bank manager since Eve set up the first apple stall in the Garden of Eden.

Faced with replacing a major supplier or keeping one going, it’s a no-brainer.  The banks have the same dilemma; do they pull the plug and lose their shirt, or do they pump in more cash and hope for the best.  

Businessmen, entrepreneurs are optimists, customers, companies and banks become addicts, just one more fix…

The people who run these big businesses are not fools.  By and large they aren’t crooks.  Yes, they can be greedy and show poor judgement but we have to begin with the premise that no one starts thinking that going broke is a good idea.

Put aside your views on outsourcing.  We have to ask ourselves; do we expect too much from contracting partners?  Are the margins too thin, are we asking for trouble?  Are we good enough at contracting?  Should we be doing it at all?

Kamikaze contracting to get the business at all costs in the misbelief volumes, market share and scale will create profits.  

Is it becoming obvious; contracting-in is safer, more reliable and cheaper in the long run?  The environment within which business activity is taking place is changing.  The tectonic plates moving.  

What company, outsourcing with the NHS, is safe.  If hosptials, who don’t have to make a profit or pay bonuses, can’t balance their books, what chance has a company that has high borrowings, shareholders to reward and bonuses to pay.

If the NHS is to continue to contract out we need to stop the race to the bottom, have better regulators, insist on performance bonds and demand a seat on the board.  

Even then it is no guarantee.  


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Reproduced here at by kind permission of Roy Lilley.