Carillion Contents


Our inquiry

1.Companies collapse. It is a standard part of the business life cycle. The demise of a major company does not in itself warrant a parliamentary inquiry. Carillion, a major UK multinational construction and facilities management company which entered compulsory liquidation in January 2018, was, however, a very unusual case:

Carillion was no ordinary company, and no ordinary collapse.

2.We chose to work together on Carillion, as our predecessor Committees did on BHS, because it is impossible to consider the management of the pension schemes without considering that of their sponsor company. Our inquiry did not consider Government decisions to award major contracts to Carillion. Those matters will be considered by the National Audit Office, the Public Accounts Committee and the Public Administration and Constitutional Affairs Committee in subsequent reports. We have also taken steps to ensure that we have not interfered with official investigations being undertaken by the Insolvency Service (IS), Financial Reporting Council (FRC), Financial Conduct Authority (FCA) and the Pensions Regulator (TPR). Our inquiry enabled the reasons for the collapse of Carillion, and its lessons for Government policy, to be considered in public. This report sets out our findings from that work. It is split into two parts. First, we consider the business and the reasons for its failure, together with the failure of various checks and balances on corporate conduct. Second, we consider the wider policy implications of the case.

3.Over the course of the inquiry, we took evidence from Carillion’s regulators, its investors, its advisors, its pension trustees, and from Carillion’s directors during its final years. We also heard from the Secretary of State for Work and Pensions and the Secretary of State for Business, Energy and Industrial Strategy to examine the Government’s long-term response to the collapse of the company. In addition to oral evidence and correspondence with Carillion’s stakeholders, we sought and received minutes and papers of Carillion’s board and its committees from the Official Receiver, many of which we have published as part of the inquiry. We are grateful to the Official Receiver and his staff for their work in providing these documents to aid our scrutiny. Similarly, the pension scheme trustees were particularly forthcoming in response to our requests for documents. Our work was aided by Gabriel Moss QC and Hannah Thornley, both of South Square Chambers, and Professor Prem Sikka, who have acted as our Specialist Advisers. We are very grateful for their work.

The company and timeline

4.Before its collapse, Carillion was the second largest construction company in the UK. It had around 43,000 employees, including 19,000 in the UK. Many more people were employed in its extensive supply chains. It had pension obligations to around 27,000 members of its defined benefit (DB) pension schemes. Carillion’s work spanned the public and private sector and extended beyond the UK, with notable contracts in the Middle East and Canada. Its work for the UK government accounted for 38% of its reported 2016 revenues and spanned from building roads and hospitals to providing school meals and defence accommodation.1

Timeline of key events



February 2006

Acquisition of Mowlem for £350 million.2

April 2007

Richard Adam appointed to board as Finance Director.3

February 2008

Acquisition of Alfred McAlpine for £565 million.4

December 2008

Pension valuation.

December 2009

Richard Howson appointed to board as Executive Director.5

March 2010

2008 pension valuation 15-month deadline.

September 2010

Richard Howson appointed Chief Operating Officer, remaining on the board.6

October 2010

2008 pension valuation agreed.

April 2011

Acquisition of Eaga for £298 million.7

June 2011

Philip Green appointed to board as Senior Non-Executive Director.8

December 2011

Pension valuation.

January 2012

Richard Howson appointed Chief Executive.9

March 2013

2011 pension valuation 15-month deadline.

December 2013

Pension valuation.10

Alison Horner appointed to board as Non-Executive Director.11

May 2014

Philip Green appointed Chairman.12

June 2014

2011 pension valuation agreed.13

December 2014

2013 pension valuation agreed.14

July 2015

Keith Cochrane appointed to board as Senior Independent Non-Executive Director.15

December 2016

Richard Adam retired as Finance Director.16


1 January

Zafar Khan appointed to board as Finance Director.17

1 March

2016 Annual Report and Accounts signed and published.18

Richard Adam sold entire existing shareholding for £534,000.19

~End March–15 April

Emma Mercer returned to UK as Finance Director of Construction Services and brought to the attention of Richard Howson and Zafar Khan “some issues with which she was not comfortable”.20

8 May

Richard Adam’s long-term incentive plan awards for 2014 vested. He sold the total amount for £242,000.21


The board conducted a review of accounting treatment for receivables following Ms Mercer’s concerns. This was reviewed by KPMG. The review concluded that assets had been misclassified but there had been no misstatement of revenue. Acted as a trigger for wider review of contract positions.

7 June

The board held a “lessons learned” exercise which considered cultural, managerial and operational shortcomings.22

8 June

The board considered a presentation on a possible equity issue.23

9 June

Final dividend for 2016 paid worth £55 million.

4–5 July

The Chairman, and board the following day, were informed that their brokers were not able to underwrite the proposed equity issue and were advised that a trading update should be made on 10 July. Philip Green remained hopeful for a “positive and upbeat” announcement to the market.24

9 July

Richard Howson stepped down as Chief Executive. Replaced by Keith Cochrane as Interim Chief Executive.

The board agrees a contract provision of £845 million to be included in their interim 2017 financial results.25

10 July

Carillion announced the £845m contract provision and comprehensive review of the Group’s business and capital structure.26

12 July

Carillion’s share value fell 70% from 10 July.27

14 July

EY appointed to support its strategic review with a focus on cost reduction and cash collection. HSBC appointed as new broker.28


The board identified a need to put in place further short term committed bank facilities.29

3 September

Zafar Khan “spooked” the board with a financial update.30

11 September

Zafar Khan sacked as Finance Director and Emma Mercer appointed as his replacement. New non-executive directors appointed and Transformation Officer seconded in from EY.31

29 September

Half-year results included a further £200m profit write down.32

24 October

Deferral of pension deficit contributions agreed, releasing £100 million unsecured and £40 million secured new bank finance.33

17 November

Third profit warning issued, alongside announcement that the company was heading towards a breach of its debt covenants.34

First week of December

Changed assumptions in weekly cashflow materially reduced the company’s short-term cashflow forecasts.35

11 December

Kiltearn Partners, the largest shareholder in Carillion, halved its stake.36

22 December

Cashflow forecast delivered to finance creditors showed the company would have less than £20 million of available cash in March 2018. As a result, it was unable to make further drawings under its £100 million unsecured facility without further waivers being granted by each of them.37

Late December

New lenders informed the company that a further waiver would not be given unless an approach was made by the company to Government.38

31 December

The company submitted a formal request for support to Government.39


3 January

FCA notified Carillion that it had commenced an investigation into the timeliness of announcements made by the company between 7 December 2016 and 10 July 2017.40

4 January

The Company met Government officials to discuss status of restructuring efforts and the need for short and long-term funding.41

9 January

The Company met with HMRC to explore the possibility of deferred payment to in respect of tax liabilities, which were otherwise due in January, February, March and April 2018. The outcome was inconclusive.42

12 January

Carillion paid £6.4 million to a series of advisors and lawyers, including KPMG (£78,000), FTI Consulting (£1m), EY (£2.5m), Slaughter and May (£1.2m).43

13 January

The company sent a letter to Cabinet Office making a final request of £160 million, including an immediate £10 million.44

14 January

Cabinet Office informed the company that it would not be willing to provide such support to the company.

The board concluded that the company was insolvent.45

15 January

Directors presented a petition to the Court for the compulsory winding up of the company on the grounds it was unable to pay its debts.46 Accepted by the Courts and Official Receiver appointed as liquidator, with PwC appointed as Special Managers to assist with the liquidation.

Government announced they were making £150 million available to support the liquidation and laying a contingent liability to indemnify the Official Receiver.47

16 January

Greg Clark MP, Business Secretary, wrote to the Insolvency Service and the Official Receiver asking them to fast-track their investigation into the causes of Carillion’s failure and the conduct of the directors.48

18 January

TPR announced they were launching an anti-avoidance investigation into Carillion’s funding of their pension schemes.49

24 January

Work and Pensions and Business, Energy and Industrial Strategy Committees launched a joint inquiry into the management and governance of Carillion, its sponsorship of its pension schemes and wider implications for company and pension scheme law, regulation and policy.

29 January

FRC announced investigations into the 2014, 2015 and 2016 KPMG audits of Carillion.50

19 March

FRC announced investigation into the preparation and approval of Carillion’s financial statements by Richard Adam and Zafar Khan.51

1 Department for Work and Pensions and the Insolvency Service, Carillion declares insolvency: information for employees, creditors and suppliers, published 15 January 2018, updated 16 January 2018

Published: 16 May 2018