Bosses at defunct facilities management and construction company Carillion were ‘too busy stuffing their mouths with gold to show any concern for the welfare of their workforce or their pensioners.’
This damning conclusion, from Frank Field MP, chair of the Work and Pensions Committee, is one of several to be found in the final report on the company’s collapse, which has been compiled in conjunction with BEIS. In it, government is accused of lacking ‘decisiveness or bravery’ whilst Carillion’s directors are described as ‘delusional’ and ‘shysters’.
Before it went into liquidation on January 15, 2018, Carillion was one of the government’s biggest private contractors. In the UK alone it could count 20,000 staff working on construction projects. It delivered services to UK schools, prisons, hospitals and the MoD.
In July and September 2017 Carillion issued profit warnings but was still awarded contracts worth £1.3bn to build key sections of the planned HS2 network. Carillion went into liquidation in January 2018 with liabilities of nearly £7bn, including a £2.6bn pension deficit and around £2bn owed to suppliers, sub-contractors and other short-term creditors. The company’s cash position amounted to £29m.
“The company’s delusional directors drove Carillion off a cliff and then tried to blame everyone but themselves,” said Rachel Reeves MP, chair of the BEIS Committee. “However, the auditors should also be in the dock for this catastrophic crash. They are guilty of failing to tackle the crisis at Carillion, failing to insist the company paint a true picture of its crippling financial problems. The sorry saga of Carillion is further evidence that the Big Four accountancy firms are prioritising their own profits ahead of good governance at the companies they are supposed to be putting under the microscope.”
Reeves added that Competition and Markets Authority should look at the break-up of the Big Four accountancy firms – KMPG, PwC, Deloitte and EY – to increase competition and resolve conflicts of interest.
The report also criticises The Pensions Regulator (TPR) and Financial Reporting Council (FRC) for being ‘united in their feebleness and timidity’, and of being too ‘passive and reactive’ to make effective use of their powers.
“The collapse of Carillion exposed terrible failures of regulation,” said Reeves. “The government needs to stop dithering and act to ensure regulators are up to the job of intervening before companies fail, rather than trying to pick up the pieces when it is too late.”
Successive governments are similarly accused of ‘having nurtured a business environment and pursued a model of service delivery which made a collapse like Carillion’s almost inevitable.’
“Government urgently needs to come to Parliament with radical reforms to our creaking system of corporate accountability,” added Field. “British industry is too important to be left in the hands of the likes of the shysters at the top of Carillion.”