Former directors of Carillion have been accused of being “asleep at the wheel” in the years leading up to the government contractor’s collapse, as they blamed factors including the calling of a general election, Brexit and non-payment of bills by Qatar.
Seven former Carillion directors were giving evidence to MPs as part of a joint inquiry by two select committees into the firm’s liquidation earlier this month.
Carillion’s demise put tens of thousands of jobs and supplier companies at risk, left hundreds of millions of pounds of public contracts unfinished, and is set to saddle the government’s pensions lifeboat with £800m of liabilities.
In the first session of the inquiry, work and pensions committee chair Frank Field accused former finance director Zafar Khan of being “asleep at the wheel” as the company’s debts built up, its pension deficit ballooned and its cashflow dried up.
Khan denied the claim.
Directors were also accused of prioritising the payment of dividends to investors over paying into a pension scheme whose deficit is estimated at around £990m.
Keith Cochrane, a former non-executive director who was appointed interim chief executive after a huge profit warning in July 2017, said: “Through the lens of today, if we had suspended dividends and not paid that £50m payment in 2017, would that have made a difference, possibly.”
Khan said: “It would have been helpful not to pay the final dividend. But at the same time we had a budget that said we could service dividend, put more money into the pension scheme and reduce net debt.”
Cochrane denied the company put shareholders’ financial interests above those of its 27,000 pension scheme members.
But he admitted that directors could have done more to flag up the company’s growing problems.
He said: “Clearly with the benefit of hindsight, should the board have been asking further, more probing questions, perhaps.”
“Clearly the business did have issues. Do I wish we’d done something about it sooner, absolutely. At the time, all the decisions I took were seeking to do the best thing for the business.”
Three former directors, giving evidence in the first of two sessions on Tuesday morning, blamed a variety of factors for the company’s demise.
Khan said the ability to secure new contracts to replace lucrative projects that were coming to an end “drifted” due to Brexit and the calling of a general election, which “had an impact on our ability to replace contracts.”
His successor Emma Mercer pointed to a £200m contract to help prepare Qatar for the 2022 World Cup, which remained unpaid for 18 months.
Cochrane said former chief executive Richard Howson had believed at a board meeting in April 2017 that Qatar was going to pay up.
“Six weeks later the world had changed and it wasn’t paid.”
MPs also ridiculed Khan for a slip in which he said he and his colleagues had brought the company’s debt down.
He eventually admitted: “The debt increased through 2017. We were unable to get the debt down. It wasn’t because we were oblivious.”
Asked about the final days of Carillion, which involved talks with its banks over a potential rescue, Cochrane said the company had asked the government, from which it derived 45% of its revenues, for a cash injection.
“Our final proposition at 7pm on the Saturday evening was for staggered support. In total over four months, it was for £160m.”
“We believed a longer-term solution was possible,” he said.
“That solution would have been the best possible outcome for [the] pension fund, customers, suppliers and employees.”