Carillion asked the government for protection from regulators and to block customers from terminating contracts two weeks before its collapse, according to information released by the National Audit Office.
In a list of support measures the contractor requested from the government, Carillion’s directors asked for “protection” from fines and other penalties from regulators relating to what it did before July 2017 when it revealed a £845m writedown.
It also wanted government customers to be prevented from terminating contracts with the company, and a commitment that the public sector would award Carillion its “fair share” of work in the future.
These requests were made on 31 December, but the government informed the company it would get “no special treatment on future contract awards” on 5 January.
Carillion then withdrew its request for protection from regulators on 8 January.
In its last full-year accounts for 2016, £1.72bn of the company’s revenue – 33 per cent – came from public sector contracts.
Other requests the contractor made between 31 December and 14 January included:
- Help persuading the Pension Protection Fund to let the company “detach” itself from its £2.6bn in pension liabilities
- A £210m four-month loan, which was later reduced to a request for £160m that included £70m to run its early payment facility
- Deferring £91m in tax payments, which was later reduced to £63m
- Settlement of claims and advance payments worth £39m on some public sector contracts
- The government to pay £125m to complete the Midland Metropolitan Hospital
The total value of the company’s various requests for money and removal of liabilities was more than £3bn.
Carillion’s chief executive Keith Cochrane told the Cabinet Office that if the government did not meet its requests, there would be “widespread problems for the public sector”.
He said there would be “no ability to manage the widespread loss of employment, operational continuity, impact upon customers and suppliers and even the physical safety of workers and the public”.
However, the government had been working on contingency plans since July and was prepared for the liquidation, with a ‘crisis management centre’ set up one week before the company went down.
Today’s report from the NAO also revealed the repercussions of Carillion’s ongoing liquidation.
The Cabinet Office has estimated the cost of carrying out Carillion’s liquidation and keeping key services running will be £148m.
However, the final cost to taxpayers will be higher, as the official receiver – which is overseeing the liquidation with the assistance of PwC – is charging a 20 per cent premium on the services it has kept running.
Carillion joint inquiry co-chair Frank Field has criticised the deal given by PwC to assist with the process.
“As special managers, with a contract to print money awarded without any competition, PwC will draw £50m for six months’ work,” he said.
“More money for PwC is less money for subcontractors and the Pension Protection Fund.”