Too many firms indulging in poor business practices, London South Bank University academics add

A London university has said 鈥渁 culture of financial deviance鈥� is embedded within the construction industry with the collapse of Carillion its most high-profile example.

Research by London South Bank University said the industry 鈥渙ften accommodate, explain away or normalize discrepancies and problems鈥�.

Carillion-Royal-Liverpool-5

Carillion鈥檚 job at the Royal Liverpool was one of three PPP schemes which helped send the firm under

It added: 鈥淭hese become part of a culture which unintentionally reduces awareness of the potential consequences of that deviant behaviour. Taken together, these factors can result in a company not following codes of practice while failing to anticipate and manage a wide range of potential reputational issues and structural internal crises.鈥�

The research project, led by Dr Sara Hajikazemi, senior lecturer in project management at the university鈥檚 business school, said this 鈥溾�榥ormalization of deviance鈥� lies not only internally, but also externally, in the wider industry environment in which construction organisations operate鈥�.

It said the competition to win work, low profit margins and the complex nature of jobs meant firms were undertaking a series of poor business practices which included late payments to suppliers and questionable accounting techniques.

Hajikazemi said: 鈥淥ur research shows that 鈥榥ormalized deviance鈥� has always been present in the construction sector.

鈥淲hat is concerning is that, as happened with Carillion, construction companies currently lack an early warning system that could alert them to emerging signs of deviant corporate behaviour and malpractice.鈥�

Carillion鈥檚 collapse was one of the biggest business failures in UK corporate history and came less than a year after it posted a 拢147m pre-tax profit for 2016, down 5% on 2015鈥檚 figure, on revenue up 14% to 拢5.2bn. In its last ever full year accounts, filed on 1 March 2017, the firm鈥檚 chairman Philip Green said: 鈥淲e have a good platform from which to develop the business in 2017.鈥�

But in a trading update published in July that year, the firm said it was making an 拢845m provision on contracts, including three PPP deals in the UK. It collapsed into liquidation in January 2018.

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