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Firms in Capital Urged to “Learn Lesson” From Carillion

The government committee that savaged the “rotten” state of Carillion has demanded that boardrooms across the City respond to its damning 101-page report into the collapse and will publish the responses in July.

The collapse of the construction giant back in January highlighted the gaffes that are committed by large businesses, particularly in their regard towards paying on time. While late payment is not solely a big business problem, Carillion’s demise urged the sentiment that these blue-chip companies aren’t exempt from blame either. Large companies have also been hesitant to admit blame, and this new report is a first step in opening up communication between late payers and their victims.

The report has been the brainchild of the Work and Pensions and Business, Energy and Industrial Strategy Committee, and the co-chairs, Frank Field and Rachel Reeves, have declared their intention to get every company, regulator and individual involved in Carillion to learn a lesson from the report’s findings.

The committee has sent letters to former Carillion bosses, financial and accounting regulators, industry bodies, and even companies such as KPMG and Deloitte, Carillion’s auditors.

The responses from the report will be published in court and will hopefully outline ways in which large companies will do better to manage their own finances and those of their customers and suppliers. At the Credit Protection Association, our credit management services protect our members’ financial position, as well as others down the supply chain.

A number of companies said that they had received the letters and were deciding how to respond. “We want them to tell us what they’re doing about the report and then we’ll publish the responses and we can debate them in parliament,” Mr Field said. “They have six weeks before we judge people by what they’ve told us they would do and what they’re actually doing.”

Carillion, a construction and public services contractor with an annual turnover of £3.5 billion, collapsed at the turn of the year leaving £1 billion of debts and pensioner liabilities of £2.6 billion. Since its demise, 2,300 workers have lost their jobs.

The committee proposed a series of recommendations including a Competition and Markets Authority review of whether the Big Four accountancy firms should be broken up. “Some people charge the government with doing a report and then forget about it,” Mr Field said. “You need to see an individual change at companies and regulators need to get serious about reform.”

The Carillion report, published on May 16, criticised the directors for overseeing a “rotten corporate culture” and said that they were guilty of “recklessness, hubris and greed”. It identified failings by regulators, the accountancy firms KPMG and Deloitte, and the government.

Ripples were felt from Carillion’s demise all the way down the supply chain. When the company collapsed, the debts it left behind not only affected its own suppliers but their suppliers also. As a result, a spotlight was fixed on payment practices throughout the UK, with much criticism aimed at the 120 days that Carillion took to pay its invoices. Various late payment initiatives have failed to make an impact, these have ranged from the government’s Prompt Payment Code to the various proposals pushed through by the Small Business Commissioner.

While the government’s efforts should eventually instigate a shift in opinion, the responsibility also lies with individual businesses. At the Credit Protection Association, our credit checks, status reports and company directories all aim to keep late payers at bay and encourage an improved management of business finances. Britain’s economic picture can only be lightened if our general debt pile is significantly reduced.

We fight to the tooth for our members, particularly those who have suffered through late payment and bad payment practices. We recently created a new department within our company dedicated to getting our members rightly compensated in accordance with the Late Payment of Commerical Debts (Interest) Act 1998, unlocking hidden cash and potential in our members and their prospects.