The collapse of Carillion, the UK’s second-largest construction firm yesterday, appeared to have a limited effect on the UK stock market. The shares have been in sharp decline recently, and hedge-funds were positioned short as the news that the company was over-extended has been common knowledge amongst those that have an interest in finding it. The UK Government wisely chose not to reward managerial incompetence by bailing out the teetering company, not from any ideological convictions, but because it has enough problems and spending taxpayers money on a failed commercial enterprise, no matter how large or how strong the ties to Government, is just giving the Opposition Party a stick to beat it with. The UK Stock Market still looks healthy, and the other construction companies will doubtless pick up some valuable crumbs from the Carillion table.
However, it’s worth keeping a close eye on the market for the next few weeks – often times in the past such events as the collapse of a single company can be pinpointed as the catalyst for a wider re-evaulation of the markets worth.