Freelance

Author Bio ▼

Jamie Hailstone is a freelance journalist and author, who has also contributed to numerous national business titles including Utility Week, the Municipal Journal, Environment Journal and consumer titles such as Classic Rock.
May 16, 2018

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Carillion

Carillion branded a ‘giant and unsustainable corporate time bomb’

The failed construction giant Carillion was a “giant and unsustainable corporate time bomb”, according to a damning new report.

The report published today by the work and pensions and BEIS parliamentary select committees accuses the firm’s board of presiding over a “rotten corporate culture”, which led to Carillion’s demise in January with debts of more than £1.5 billion.

In the report, Carillion’s business model is described as a “relentless dash for cash, driven by acquisitions, rising debt and exploitation of suppliers”, with accounting practices that “misrepresented the reality of the business”.

The report also concludes that Government has “lacked the decisiveness or bravery” to address the failures in corporate regulation that allowed Carillion to become a “giant and unsustainable corporate time bomb”.

And it calls on ministers to carry out an “ambitious and wide-ranging set of reforms” to “reset our systems of corporate accountability”.

“The mystery is not that it collapsed, but that it lasted so long,” the report states.

The chair of the BEIS committee, Rachel Reeves, said the construction company’s “delusional directors drove Carillion off a cliff and then tried to blame everyone but themselves”.

“Their colossal failure as managers meant they effectively pressed the self-destruct button on the company,” added Ms Reeves.

“However, the auditors should also be in the dock for this catastrophic crash. They are guilty of failing to tackle the crisis at Carillion, failing to insist the company paint a true picture of its crippling financial problems. The sorry saga of Carillion is further evidence that the Big Four accountancy firms are prioritising their own profits ahead of good governance at the companies they are supposed to be putting under the microscope.

“KMPG, PwC, Deloitte and EY pocket millions of pounds for their lucrative audit work – even when they fail to warn about corporate disasters like Carillion.

“It is a parasitical relationship which sees the auditors prosper, regardless of what happens to the companies, employees and investors who rely on their scrutiny. The Competition and Markets Authority must now look at the break-up of the Big Four accountancy firms to help increase competition and deal with conflicts of interest.”

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