Committees

Pension scheme trustees questioned on Carillion

30 January 2018

The Work and Pensions and Business, Energy and Industrial Strategy Committees examines the collapse of Carillion. The company's collapse leaves a mountain of debt, a giant pension deficit, tens of thousands of jobs and supplier companies at risk, hundreds of millions of pounds of unfinished public contracts, and reported on-going costs to the UK taxpayer of £millions a day.

Looking into Carillion's collapse

The Committees are investigating how a company that was signed off by KPMG as a going concern in Spring 2017 could crash into liquidation with £billions of liabilities and just £29 million cash on its books less than a year later.

The session with the Financial Reporting Council and the Insolvency Service will examine the background to the collapse of Carillion and whether regulators had the necessary powers to prevent it from occurring.

The session with the pension trustees will also explore the steps taken by the company, trustees and Pensions Regulator to support and protect the pension scheme, and whether changes to the regulatory framework would have resulted in a better outcome for the scheme members and the Pension Protection Fund.

On 6 February, the Committees will hold an oral evidence session with former Carillion directors.

Witnesses

Tuesday 30 January 2018, Wilson Room, Portcullis House

At 9:15am

At approximately 10:15am

Robin Ellison has provided written evidence ahead of his appearance in response to the Committee's request.

Pension deficit

In 2016, Carillion paid dividends to its shareholders of £78.9 m from 2015's profits: exceeding the £73 million it generated in cashfrom operations. It paid a further dividend of £54 million in June 2017 – just one month before its first profit warning.

Despite a rising pension scheme deficit, Carillion paid in only £51 million in 2016, three million lower than the previous year, and £27.9 million less than it allocated for dividends over the same period.

The headline pension deficit figure reported in company accounts for the 29,000 member scheme was £587 million as of the first half of 2017, up from £318 million in 2015. During the same period, net borrowing within the company ballooned from £170 million to £571 million. Recent reports put the full liability buyout figure for the pension fund at £2.6 billion, with the PPF estimating it will cost them £8-900 million to finance the shortfall in the scheme.

In 2016, Carillion changed the company's pay policy to relax its clawback conditions for executive bonuses, limiting the criteria under which the company could demand the repayment of executive bonuses. Previously the firm could ask for cash back if the business went bust but the revised policy said it could only do so in the event of gross misconduct or if the financial results had been misstated. On 17 January this year the Government announced that Carillion's directors and executive will not get any bonuses or severance payments.

Further information

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