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Calls for change grow in wake of MPs' Carillion report

17 May 2018

Following the publication of a 100-page report by two committees of MPs on the subject of the collapse of Carillion, industry bodies have increased calls for measures to be agreed to avoid the situation being repeated.

After the company closed in January, with a debt of around £1.5bn, a number of issues have been highlighted as contributing to this.

MPs have condemned the Carillion board for overseeing unsustainable business practices and also called for changed in the Big Four accountancy firms.

The report described regulators as "toothless" with the Big Four accountancy firms a "cosy club incapable of providing the degree of independent challenge needed".

Chair of the MPs business committee Rachel Reeves said the Carillion directors had driven "the company off a cliff" by taking on low-margin contracts.

However, the PFM Editorial Advisory Board previously highlighted the issue of public sector procurement, which typically sees the lowest bidder win and was another factor in Carillion's failure.

The government was also deemed to be at fault by continuing to award contracts to Carillion, despite profit warnings and rising concerns on its long-term future.

Among those responding to the report was the Specialist Engineering Contractors' (SEC) Group, urging a four-point plan to deal with the issues arising from the Carillion collapse.

In addition to public sectors using project bank accounts to ensure prompt payment for all concerned, amendment of the Public Contracts Regulations 2015 should be made to ensure 30-day payment terms, said SEC.

Retention monies should additionally be placed in a protected scheme and the Small Business Commissioner should be given the power to fine large companies for poor treatment of their supply chains, the SEC advised.

SEC chief executive officer Professor Rudi Klein said: "Unless we act now, the risk is that we'll end up with more Carillions."

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