The Government must learn from Carillion by enforcing fair payment and opening up public sector contracts to smaller firms, according to the Federation of Master Builders (FMB).

Commenting on the joint report on Carillion from the Work and Pensions and Business, Energy and Industrial Strategy Select Committees, Brian Berry, Chief Executive of the FMB, said “It’s the small firms in Carillion’s supply chain that bore the brunt of the giant’s demise earlier this year. The Government now has a unique opportunity to completely change how it works with the private sector. For too long, many large firms have reigned supreme and walked all over their supply chains. MPs are right to note that “measures that Government has taken to improve the business environment, such as the Prompt Payment Code, have proved wholly ineffective.” As a signatory of the Government’s Prompt Payment Code, Carillion should have paid 95 per cent of invoices within 60 days. However, Carillion enforced standard payment terms of 120 days to its suppliers and we know of FMB members that have had to wait for more than 200 days to be paid by major contractors. A company that was so flagrantly breaking the rules should not have been rewarded by the Government with juicy contract after juicy contract.”

“The collapse of Carillion created a ‘domino effect’ among sub-contractors. We know of firms that have lost more than £200,000 since the collapse and of others that were so reliant on Carillion contracts, they’ve gone out of business entirely. Once a company at the top of a chain goes under it creates a ripple effect. In this instance, however, the ripple has been more like a tsunami because of the extent to which the Government relied on this single company. At present, there is nothing in place to ensure another Carillion doesn’t happen again.”

“This report is welcome but we now want to see root-and-branch reform in terms of how the Government procures from the private sector. The Government should exclude suppliers from major Government procurements if they do not demonstrate fair, effective and responsible payment practices. The Government should also end retentions abuse by ensuring that retentions are held in a deposit scheme. Finally, the Government must also make greater efforts to work directly with small firms by breaking larger contracts down into smaller lots. That way, not only will the Government spread its risk, it will also reap the benefits that come from procuring a greater proportion of its work from a broad range of small companies. Small companies reinvest profits into the local economy and in construction, small firms train two thirds of all apprentices. Ensuring SMEs win a higher proportion of public sector contracts makes sense on every level.”

The Financial Reporting Council (FRC) has commenced an investigation into the conduct of Mr Richard Adam and Mr Zafar Khan, former Group Finance Directors of Carillion plc and members of the ICAEW, in relation to the preparation and approval of the financial statements of Carillion plc for the years ended 31 December 2014, 2015 and 2016, and the six months ended 30 June 2017, and the preparation and reporting of other financial information during the period 2014-2017 . The investigation will be conducted under the Accountancy Scheme. The FRC announced an investigation under the Audit Enforcement Procedure into the audit of the financial statements of Carillion by KPMG on 29 January 2018.

The investigations will be undertaken by the FRC’s Executive Counsel and Enforcement Division as quickly and thoroughly as possible.

The FRC is liaising closely with the Official Receiver, the Financial Conduct Authority, the Insolvency Service and The Pensions Regulator to ensure that there is a joined-up approach to the investigation of all matters arising from the collapse of Carillion.

This latest probe is in addition to an investigation under the audit enforcement procedure into the audit of the financial statements of Carillion by KPMG on 29 January 2018.


Unite, the UK’s largest union, has accused the government of failing to fully protect workers left in limbo following the collapse last month of Carillion.

This follows a Westminster Hall debate this week called by Eleanor Smith MP, into the TUPE (transfer of undertakings protection of employment regulations) provision for Carillion workers.

As the majority of the Carillion companies went into compulsory liquidation, the normal TUPE provisions which ensure that pay and conditions are protected, when workers are transferred between companies, do not apply.

However despite MPs from all sides of the House of Commons calling for workers, especially those on public sector contracts, to have their pay and conditions protected through a “voluntary TUPE arrangement,” Andrew Griffiths MP the junior minister at the Department for Business Energy and Industrial Strategy, declined to do so.

Instead Mr Griffiths merely said “wherever practical and possible” the working conditions of Carillion workers having their contracts transferred would not be on detrimental terms and conditions.

In winding up the debate Labour MP Eleanor Smith, said that with the jobs of 11,800 Carillion workers still hanging in the balance: “She was disappointed that the Government couldn’t assure me on TUPE protection.”

Unite assistant general secretary Gail Cartmail said “Thousands of Carillion workers remain in limbo and while there have been plenty of warm words from government ministers that public sector contracts will be protected, there are still no assurances that the terms and conditions of the workers will be protected.

“MPs from all parties called on the government to introduce voluntary TUPE procedures to ensure that workers who were entirely blameless in Carillion’s collapse have their pay and conditions protected.

“It is to the government’s discredit that they have refused to introduce this minor and simple measure which would provide some reassurance to these workers.”

A further package of support for the businesses and workers affected by Carillion’s liquidation has been welcomed by Business Secretary Greg Clark.

Through delivery partners that include all the major high street lenders, the British Business Bank will provide support to make available up to £100 million of lending to small businesses who may not have the security otherwise needed for conventional bank lending using its Enterprise Finance Guarantee programme.

This will be of benefit to small businesses, including the chain of subcontractors to Carillion, who may not have sufficient assets as security to access conventional loans. These guarantees can be used to support overdraft borrowing and refinancing of existing debt.

The UK’s leading banks have also furthered their commitment to provide support to those affected with UK Finance confirming additional support for personal banking customers concerned about overdraft, mortgage or credit card repayments, as well as further financial support for small businesses to provide short-term relief to help keep them afloat.

Business Secretary Greg Clark said “We want to signal very clearly to small and medium sized businesses who were owed money by Carillion that they will be supported to continue trading.

“The banks have responded to my request by agreeing to support businesses and individuals affected. This further guarantee will help those businesses who may not be able to provide the usual security for a loan.

“I will continue to work closely with business organisations, trade unions and banks to actively support those affected by Carillion’s insolvency.”

British Business Bank CEO Keith Morgan said “The Enterprise Finance Guarantee (EFG) is an important option for smaller businesses who need access to finance, but may not be able to meet a provider’s normal security requirements. To help in these exceptional circumstances, we have designed additional flexibility into EFG that could be particularly suitable for firms in the Carillion supply chain. We would encourage lenders to work with their customers to use these new flexibilities to meet their needs.”

UK Finance Managing Director, Commercial Finance Stephen Pegge said “UK banks are working with government to support customers and businesses who have been impacted by the Carillion liquidation. The enhancement of the Enterprise Finance Guarantee by the British Business Bank will help those facing temporary cash flow issues to access the finance they need to support their businesses through this period.”

This package is in addition to the more than £200 million already announced by Lloyds Banking Group, HSBC and RBS.

As the economy continues to come to terms with the collapse of Carillion, the latest figures suggest that on the day of liquidation, the industry giant was the main contractor on 57 construction projects worth a total of £5.7 billion, including a £1.3 billion HS2 contract.

This latest information comes from construction industry analysts Barbour ABI, who outlined that ten of the 57 projects were each individually worth more than £150 million, such as the Royal Liverpool hospital and an Army basing programme in Salisbury worth £450 million and £340 million respectively.

Carillion projects worth a total of £5.7 billion carillion live projects

Carillion were also involved in 16 framework contracts as part of a list of companies pre-selected or pre-qualified to undertake works for an organisation. These framework contracts are not included as part of the final 57 projects as there is no guarantee that they had won any work from the framework.

Commenting on these findings, Michael Dall, Lead Economist at Barbour ABI, said “Carillion were deeply embedded within the construction industry – they were the second biggest contractor in the UK by revenue. Our records show that they were the main contractor on almost 60 schemes worth a total value of £5.7 billion. That is not to mention the plethora of other contracts where they were carrying out other construction roles.”

      Read more: Carillion to be investigated for pension fraud

“The sector where Carillion had the largest presence was infrastructure – road and rail projects were a particular speciality for the firm. In addition, Carillion were in the process of delivering two new hospitals and were also responsible for various school improvement projects. What happens to these projects is a matter for conjecture. If the reason Carillion went bust was due to under-bidding then it stands to reason that the financial terms will have to be renegotiated. There is no doubt this will happen but will it happen quickly enough to save the many firms in the Carillion supply chain?”

Following questioning by The Work and Pensions Committee regarding the way pension investments were managed at collapsed construction giant Carillion, The Financial Reporting Council (FRC) has decided to open an investigation under the Audit Enforcement Procedure in relation to KPMG’s audit of their financial statements, covering the years ended 31 December 2014, 2015 and 2016 – with additional audit work of 2017 to follow.

The investigation will be conducted by the FRC’s Enforcement Division, and will consider whether the auditor has breached any relevant requirements, in particular the ethical and technical standards for auditors. Several areas of KPMG’s work will be examined including the audit of the company’s use and disclosure of the going concern basis of accounting, estimates and recognition of revenue on significant contracts, and accounting for pensions.

The FRC have stated that they will “conduct the investigation as quickly and thoroughly as possible.”

They have also confirmed that they are progressing with urgent enquiries into the conduct of professional accountants within Carillion in connection with the preparation of the financial statements and other financial reporting obligations under the Accountancy Scheme, liaising closely with the Official Receiver, the Financial Conduct Authority, the Insolvency Service and The Pensions Regulator to ensure that there is a joined-up approach to the investigation of all matters arising from the collapse of Carillion.

Frank Field, chairman of the Work and Pensions Committee said “It’s clear that Carillion has been trying to wriggle out of its obligations to its pensioners for the last 10 years.”

More to follow.

Construction behemoth Carillion have given the shock announcement that they are to go into liquidation, putting thousands of jobs at risk.

Little is known about the details as yet, but according to the statement talks between the firm, lenders and government failed to reach an adequate solution for saving the second biggest construction company in the UK.

The company employs a total of 43,000 people around the world – 20,000 of which are located in the UK. It is not yet clear how these people will be affected, however, government have stated that they will continue to provide funding in order to maintain public services currently run by Carillion.

News of the liquidation will undoubtedly come as a shock to construction professionals, who in recent years have seen the firm involved in major projects such as HS2 and the delivery of schools and prisons. They are also the second biggest supplier of maintenance services to Network Rail, and they maintain 50,000 homes for the Ministry of Defence.

Where did it all go wrong?

In a BBC article, Carillion chairman Philip Green said “This is a very sad day for Carillion, for our colleagues, suppliers and customers that we have been proud to serve over many years.

“In recent days, however, we have been unable to secure the funding to support our business plan and it is therefore with the deepest regret that we have arrived at this decision.”

Bernard Jenkin, the Conservative chairman of the House of Commons Public Administration Committee, added “This really shakes public confidence in the ability of the private sector to deliver public services and infrastructure.”

“There needs to be a change in the mindset of many of many of these companies… if you’re actually doing a very substantial amount of business at taxpayers expense for the taxpayer, you’ve got to treat yourself much more as a brand of the public service not as a private company just there to enrich the shareholders and the directors.”

“Ironically, Whitehall tends to do contracts with companies that it always does contracts with, because that’s the safe thing to do – that’s the perception. A great many small and medium-sized companies feel excluded.”

Mick Cash, the general secretary of the Rail, Maritime and Transport (RMT) union, concluded “This is disastrous news for the workforce and disastrous news for transport and public services in Britain.

“RMT will be demanding urgent meetings with Network Rail and the train companies today with the objective of protecting our members jobs and pensions.

“The infrastructure and support works must be immediately taken in house with the workforce protected.”

According to BBC business editor Simon Jack, some of Carillion’s contracts will now be taken on by other firms whilst others could be renationalised once again.


More to follow.

Multinational facilities management and construction services company Carillion have released a half-year trading statement which suggests that Brexit will not affect them in the short term, although the long term changes are yet to be seen.

The statement highlighted that despite the economic uncertainty prior to the referendum and the subsequent fallout afterward, their support services have experienced revenue and margin growth and their work winning, order book and pipeline of contract opportunities are still strong.

Overall, the Group remains on track to make further progress in 2016.

The statement said “We continue to expect our full-year performance to be led by revenue and margin growth in support services, with Public Private Partnership projects, Middle East construction services and construction services excluding the Middle East also performing in line with expectations. Therefore, with revenue visibility for the full year of 97 per cent and a strong pipeline of further contract opportunities, the Group remains on track to make further progress in 2016.

“The referendum vote in favour of the UK leaving the European Union has obviously created uncertainty for the UK economy as a whole and therefore for businesses generally, including Carillion, and it is clearly too early to predict the extent to which businesses will be impacted by this result. However, Carillion has no significant operations in Mainland Europe and prior to the referendum we undertook extensive work to assess the possible impact on our business of a vote to leave and we have put in place robust plans to manage this outcome.”