Carillion: 'urgent need' to reform Government risk assessments

The Wolverhampton-based construction and services giant was given a risk rating of amber for months before its collapse owing to performance on contracts with the Ministry of Defence and Ministry of Justice.

However, it was not until after the company issued a profit warning in July 2017 that the Government downgraded it to red.

A joint Commons inquiry into the collapse has written to Cabinet Secretary David Lidington with concerns over the limited risk assessments which were based on "out-of-date financial data".

The costs to the public purse of the collapse have yet to be quantified but the company left billions of pounds of debt and liabilities.

Government contracts formed a significant part of its operations - and reported assets and revenue - and included major transport and health infrastructure projects as well as ongoing provision of public services in schools and prisons.

The costs of administering the company's insolvency will also fall to the public purse.

In its recent report into the collapse of Carillion, the joint inquiry concluded that Government's Crown Representative system - "semi-professional and part-time" - provided little warning of the risks in a key strategic supplier and should be reviewed immediately.

A letter to Mr Lidington, signed by work and pensions committee chairman Frank Field and business committee chairwoman Rachel Reeves, said: "The assignment of a Crown Representative to Carillion served no noticeable purpose in alerting the Government to potential issues in advance of company's July 2017 profit warning.

"The absence of one between August and November 2017 cannot have increased the Government's ability to keep itself informed of the direction of the company during a critical period before its collapse."

The letter expresses concerns at the scope of the risk assessments carried out - limited to contracts directly involving central Government, despite wider public contracts having a massive impact both in propping up Carillion's balance sheet and in its ultimate collapse - and based on superseded accounts.

The letter continued: "The financial data used in these risk assessments appears to be out of date. The September 2016 assessment is still quoting Carillion's total revenue figure from the 2014 accounts despite the 2015 accounts having been published back in March 2016.

"Is this an isolated case or are all strategic supplier risk assessments based on out-of-date financial data?"

In the wake of Carillion's collapse work has ground to a halt on the Midland Metropolitan Hospital in Smethwick, where it was the primary contractor. The hospital had been due for completion this year but had already run into delays. It will now not be ready for use until 2022.

Meanwhile 2,332 people have lost their jobs since the company went into liquidation. The Official Receiver has also reported that 1,116 employees have left the business since the company went into liquidation in January.

A total of 11,638 jobs have been saved, and just over 3,000 employees have been retained to work on Carillion's remaining services to public and private sector customers until decisions are taken to transfer or end the contracts.