Carillion directors set for a grilling after MPs summon them to inquiry
Senior executives from construction group Carillion are to be quizzed by MPs on their handling of the business in the months leading up to its dramatic collapse.
Former chief executive Richard Howson, who quit his post in July when the group issued the first of a series of profit warnings which ultimately lead to its demise, will appear before the joint Work and Pensions and Business, Energy and Industrial Strategy committee on February 6.
Also summoned to appear are chairman Phillip Green, finance directors Richard Adam, who left the company in December, Zafar Khan and Emma Mercer. Keith Cochrane, who had been acting as interim chief executive following Mr Howson’s departure, has also been called to give evidence.
The hearing is likely to be an ordeal for the executives, who have been heavily criticised for what happened to the business and for the resultant impact its contracts and supply chain.
The Association of British Insurers has said an estimated £31m is expected to be paid by trade credit insurers to help firms in the Carillion supply chain recover from the collapse.
Trade credit insurance covers firms against the risk of not being paid for the goods or services they provide, following an insolvency, protracted default or political upheaval.
Mark Shepherd, Assistant Director, Head of Property, Commercial and Specialist Lines, at the ABI, said: “The demise of Carillion is a powerful reminder of how trade credit insurance can be a lifeline for businesses in these uncertain trading times. This insurance is an essential business tool that helps firms trade and expand in the UK and overseas.
“For all businesses, large or small, bad debt could easily put their day-to-day operations at risk, threatening the jobs of their employees. One insolvency can risk a domino effect to hundreds of firms in the supply chain.”
The joint select committee investigating Carillion said the collapse had left a mountain of debt, thousands of potential job losses, a giant pension deficit and hundreds of millions of pounds of unfinished public contracts with vast on-going costs to the UK taxpayer.
The committees’ investigation will look at how a company that was signed off by KPMG as a going concern in spring 2017 could crash into liquidation with a reported £5bn of liabilities and just £29m in cash less than a year later.
The scope of the inquiry will also extend to why KPMG signed off the accounts just four months prior to the first profit warning.
Prior to hearing from the Carillion executives, on January 30 MPs will hear from representatives of The Financial Reporting Council and The Insolvency Service, plus Chris Martin, managing director, Independent Trustee Services – a member of the Carillion DB Pension Scheme Trustee Board since January 8, and Robin Ellison, chair of trustees of Carillion DB Pension Scheme.
Despite a rising pension scheme deficit, in 2016 Carillion paid just £51m into the pension scheme – £3m less than the previous year, and £27.9m less than it allocated for dividends over the same period.
The headline pension deficit figure reported in company accounts for the 29,000-member scheme was £587m as of the first half of 2017. Net borrowing within the company had ballooned to £571m.
Latest reports put the full liability buyout figure for the pension fund at £2.6bn, with the Pension Protection Fund estimating it will cost between £800 to £900m to finance the shortfall in the scheme.
