Carillion used suppliers to “prop up a failing business model” and conceal true levels of debt, say MPs investigating the failed government contractor.
The parliamentary inquiry into the collapse of a company that provided a host of vital public services, including catering in schools, prison maintenance and construction of new NHS hospitals will conclude on Wednesday with the publication of the MPs’ final report. It is expected to name and shame those responsible for the failure of the listed company, which had a UK staff of nearly 20,000 when it crashed into administration in January.
In a taste of what is to come, the work and pensions committee chairman, Frank Field, said: “Carillion displayed utter contempt for its suppliers, many of them the small businesses that are the lifeblood of the UK’s economy.
“The company used its suppliers as a line of credit to shore up its fragile balance sheet, then in another of its accounting tricks ‘reclassified’ this borrowing to hide the true extent of its massive debt.”
Field’s comments came as the joint inquiry with the business, energy and industrial strategy committee, published evidence from Santander, the bank that operated the company’s early payment facility. Its loss was one of the events Carillion’s directors attempted to blame for its eventual failure.
However, in the letter the Santander chief risk officer, Patricia Halliday, sets out why the bank pulled the plug on the facility in December 2017. In the wake of a profit warning that summer, Halliday said Santander had worked with other banks on a refinancing plan contingent on the company making disposals.
“Despite the provision of these new money commitments and continued close engagement with Carillion into December, the envisaged disposals did not take place and the detailed business and restructuring plans originally expected to be received by 8 December were further delayed,” Halliday writes. “This series of events … further undermined Santander’s confidence in Carillion’s financial position.
“In light of the lack of progress with the restructuring plan, Santander took the decision to terminate the … facility,” she adds.