Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to a newer version or another browser.

Your browser appears to have cookies disabled. For the best experience of this website, please enable cookies in your browser

We'll assume we have your consent to use cookies, for example so you won't need to log in each time you visit our site.
Learn more

Carillion slammed for its 'contempt' towards suppliers

carillion rail

MPs have slammed Carillion for showing “utter contempt” for suppliers and accused the construction giant of using its supply chain to prop up the business.

The failed construction and services firm used an Early Payment Facility (EPF) that allowed suppliers to be paid earlier by Carillion’s bank in return for taking discounted payment. Despite being signed up to the Prompt Payment Code, Carillion has been described as ”notorious late payers” with standard terms of 120 days.

 

The Work and Pensions Committee and Business Committiee joint parliamentary inquiry released evidence from Santander, which operated the facility, ahead of Wednesday’s publication of a report into the collapse.

Credit rating agencies Moody’s and Standard and Poor’s claimed Carillion’s accounting practices for the EPF hid its true level of borrowing from financial creditors. Moody’s estimated that £498M could have been misclassified as a result. 

Santander withdrew the facility in December 2017, weeks before the company entered compulsory liquidation. The bank said a ’lack of progress’ with the restructuring plan ‘undermined’ its confidence in Carillion’s financial position. 

Work and pensions committee chairman Frank Field MP slammed the construction giant for its treatment of suppliers.

He said: “Carillion displayed utter contempt for its suppliers, many of them the small businesses that are the lifeblood of the UK’s economy. The company used its suppliers as a line of credit to shore up its fragile balance sheet, then in another of its accounting tricks ‘reclassified’ this borrowing to hide the true extent of its massive debt. 

“This knocks down for good the stance of the Carillion board that whingeing and blaming others can be any defence.”

Business committee chairwoman Rachel Reeves MP added: “The collapse of Carillion left small businesses and sub-contractors out-of-pocket with many left unpaid for months and facing ruin. 

“It’s a bitter irony that while Carillion were fully signed up to the Government’s Prompt Payment Code, they were making their suppliers hang on for 120 days or more to be paid. 

“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.”

Tags

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions. Please note comments made online may also be published in the print edition of New Civil Engineer. Links may be included in your comments but HTML is not permitted.