Union calls for Carillion criminal investigation one year on

Following a succession of additional scandals worsening the blow of the Carillion scandal, one of the UK’s leading workers’ rights organisation has called on the Government to take more stringent action to avoid similar occurrences. Unite has argued the case for a criminal investigation into the case, with KPMG still being investigated by the Financial Reporting Council for its role as auditor at Carillion.

Carillion, a British professional services firm which provided facilities management and construction services to the UK public sector, entered compulsory liquidation at the start of 2018, threatening thousands of jobs and jeopardising the delivery of a number of keystone services. The company, headquartered in Wolverhampton, United Kingdom, ran into trouble after losing money on big contracts, as well as running up unsustainable debts totalling around £1.5 billion. Its failure forced the Government to provide funding to maintain the public services formerly supplied by Carillion.

In the fallout, the Government and the professional services world have both been pilloried by Parliament and the public for their seemingly oblivious approach to the ailing company’s future. Carillion issued three profit warnings over 2017, yet continued to receive new contracts from the Government to provide keystone services. Meanwhile, Big Four firm KPMG is still part of a lengthy probe from the Financial Reporting Council regarding its auditing work, with suggestions that failures to adhere to ethical and technical industry criteria had caused a lack of transparency regarding Carillion’s health.

The severity of the Carillion scandal eventually led the Government to pilot a scheme requiring its outsourcers to draw up so-called ‘living wills’, late last year. The IT cheat-sheets were understood to be for the use of the Government in the event of those firms entering administration, with Capita, Serco and Sopra Steria the first to have created such measures. 

However, critics believe that not enough has been done to hold those behind Carillion’s collapse to account. According to Unite, the UK’s second largest trade union, the collapse of construction giant Carillion should be subject to a criminal investigation, with the labour rights body also accusing the Government of failing to take sufficient action to ensure there is not another “corporate meltdown”, on the first anniversary of the group going out of business.

Despite the scale of Carillion’s collapse, no action has yet been taken or recommended against any of Carillion’s directors or senior managers. Meanwhile, the Government’s only recommendation for change remains the pilot policy on living wills, and the Government’s pension regulator has failed to deliver any recommendations from its investigation into the £800 million shortfall left in the firm’s pension, which leaves thousands of former employees facing a funding shortage at the end of their careers.

Unite’s Assistant General Secretary Gail Cartmail said, “It is staggering that a year after the biggest corporate failure in modern UK history the government has carried on as though it is business as normal… The fact that no one involved in Carillion has yet had any form of action taken against them, demonstrates either that the regulators are failing to do their jobs or that existing laws are too weak. If it is the latter then we need better stronger laws… A year on from Carillion’s collapse the government needs to stop prevaricating and start taking effective action.”

Experts believe that Carillion could have been trading while insolvent for several years prior to its collapse, when 3,000 staff were made redundant. The effects of the liquidation were by no means isolated, however, sending shock-waves down the supply chain. Many of Carillion’s subcontractors were subsequently also forced out of business, making trade unions especially keen to avert a similar crisis in the future.

Elsewhere, general union GMB joined Unite's calls for the Government to learn from the Carillion debacle. According to GMB, the lifetime value of outsourcing contracts awarded “rocketed” from £62 billion to £95 billion in the year since Carillion's collapse. The union pointed to almost £2 billion in contracts awarded to Capita and Interserve alone, despite both issuing profit warnings, as being endemic of the 53% rise, and suggested it showed the Government was “hell-bent” on privatisation of public services, regardless of the impact on users.

GMB's National Secretary, Rehana Azam, added, “What other explanation can there be for this huge increase on outsourced contracts in the year Carillion went bust and when other outsourcing giants look like they’re on life support?”