PwC charged £356 per hour for Carillion insolvency work

03 September 2018 Authored by Consultancy.uk

Big Four firm PwC has been criticised for the hourly rate it has charged for Partners during the administration of Carillion. While the firm asserts that its services have reduced the cost to the tax payer of the construction firm’s collapse, workplace representatives claim many of the 2,000 staff who lost their jobs would not make in a week what some PwC Partners made in one hour.

Construction outsourcer Carillion filed for compulsory liquidation at the beginning of the year, sparking a scandal that looks set to run the length of 2018. The news came after talks with potential lenders failed, putting thousands of jobs and businesses at risk. The company, headquartered in Wolverhampton, United Kingdom, had run into trouble after losing money on big contracts, as well as racking up unsustainable debts totalling around £1.5 billion – and though it flagged this up in a succession of profit warnings, the UK Government continued to award it work.

Following the collapse itself, former external auditor KPMG was quickly embroiled in an FRC investigation on the matter, for allegedly failing to highlight booking irregularities. This proved to be just the first of a succession of criticisms levelled at members of the Big Four for their role in Carillion’s collapse.

MPs went on to accuse all the Big Four firms of “feasting” on Carillion’s “carcass”, having received a combined total of £71.6 million in fees from the ailing firm. PwC was paid most of the four in fees, bringing in a total of £21.1 million, with £8.5 million coming directly from the company. PwC brought in a further £6.5 million from government contracts it fulfilled as part of its work with Carillion, and £6.1 million from its work with the group’s pension schemes, something which none of the other firms supplied figures for.

Big Four fees from Carillion since 2008

Chair of the Work and Pensions Committee, Frank Field, said at the time that PwC “managed to play all three sides”, before being hired to work as special managers during Carillion’s inevitable administration. He added, “It was perhaps telling that, with their three fellow oligarchs conflicted, PwC were appointed to this lucrative position without any competition.”

In its response to Frank Field and Rachel Reeves, Chair of the BEIS select committee, PwC told the pair that the firm had helped save thousands of jobs in its role. According to her figures, PwC managed to employ 6,423 members of Carillion staff. Meanwhile, 9,073 were transferred with the contracts which have been migrated, 976 have resigned and 1,705 have been made redundant.

Now, however, PwC has come under further fire, having revealed the hefty price-tag attached to its insolvency work at Carillion. As set out by the firm in a letter to MPs, its partners working on the insolvency of Carillion were paid up to £1,156 per hour during the first eight weeks of the liquidation. The correspondence published by the joint Work and Pensions and Business, Energy and Industrial Strategy (BEIS) select committees this week stated that PwC had worked for a total of 57,534 hours during the first two months after Carillion entered into administration.

Of these, 13,656 hours were charged by specialist workers required to assist PwC’s restructuring staff due to the complexities of the work involved. These hours raked in a huge time cost of £5.368 million, at an average rate of £393 per hour. The firm’s pension specialists were the highest paid, with partners receiving £1,156 hourly and directors £1,060 per hour. It is still expected that PwC will earn more than £50 million as a result of the collapse, during which 2,800 workers were made redundant.

Commenting on the latest figures, Gail Cartmail, Assistant General Secretary of the UK’s largest trade union, Unite, said, “For the thousands of workers who have lost their jobs, these figures will be viewed as both eye-watering and excessive. PwC staff will be earning in an hour what many of the workers who had their lives turned upside down earned in a week.”

When consulting industry figures are faced with such criticism, they traditionally suggest that their services actually save money. This case is no different, with a PwC spokesman remarking in response, “Without this work, the cost to UK jobs, the economy and the taxpayer would be considerably higher.”

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