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Carillion used suppliers to prop up business: MPs


Carillion executives used suppliers to “prop up their failing business model” according to MPs investigating the collapse of the construction and outsourcing firm.

They said evidence from lender Santander showed the company had used its early payment facility (EPF) to conceal its true level of borrowing.
The facility allowed suppliers to Carillion – described as “notoriously late payers” – to receive their money earlier via the bank, but at a discount, documents supplied to two parliamentary committees revealed.
This was effectively a line of credit that should have been described as “borrowing” in annual accounts but was instead presented as liabilities to “other creditors”, the MPs said.
Credit ratings agency Moody’s said that as much as £498m was misclassified as a result, the latest findings from the Work and Pensions and Business, Energy and Industrial Strategy (BEIS) committees said.
Details submitted to the committee by Santander showed that it had written off £91m as bad debt in relation to the EPF.

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Video: How did it come to this for Carillion?

Santander finally withdrew the facility in December 2017, just weeks before the company went into liquidation.
Labour MP Rachel Reeves, chair of the BEIS committee, said: “The collapse of Carillion left small businesses and sub-contractors out of pocket with many left unpaid for months and facing ruin.”
Carillion was signed up to the Government’s prompt payment code for dealing with suppliers but was making them wait for 120 days or more for their money, she added.

Ms Reeves said: “Carillion’s early payment facility ripped off their suppliers, forcing them to accept a cut in what they were owed, and was a blatant attempt by Carillion management to prop up their failing business model.”
Frank Field, the Labour chair of the Work and Pensions committee, said: “Carillion displayed utter contempt for its suppliers, many of them the small businesses that are the lifeblood of the UK’s economy.”
The disclosures on Carillion’s use of the EPF comes ahead of conclusions of the MPs’ investigation due to be published this week.
Sky News has revealed that the committees will say that former bosses at the company should face a formal inquiry into their fitness to serve as company directors.
Carillion collapsed earlier this year with total pension liabilities of about £2.6bn and other debts of more than £4bn, making it one of the most costly insolvencies for many years.
The company employed more than 19,000 people on Britain when it went bust.

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Since then, more than 11,000 jobs have been salvaged as contracts have been carved up and rehoused with other businesses, but more than 2,000 have been made redundant.
Carillion was one of Britain’s leading builders of new schools and hospitals and its collapses has raised urgent questions about the provision of key infrastructure by the private sector.

Source: Sky

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