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| Carillion ignored warnings about pensions, documents reveal | Carillion ignored warnings about pensions, documents reveal |
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| Pensions advisers repeatedly warned that Carillion was prioritising shareholder dividends over the funding of its pension scheme years before the government contractor’s collapse, according to documents released by the work and pensions committee. | Pensions advisers repeatedly warned that Carillion was prioritising shareholder dividends over the funding of its pension scheme years before the government contractor’s collapse, according to documents released by the work and pensions committee. |
| The committee, whose members will question former Carillion directors at a hearing on Tuesday, released new evidence hours after the number of confirmed job losses at Carillion hit 829, with uncertainty persisting over a further 17,500. | The committee, whose members will question former Carillion directors at a hearing on Tuesday, released new evidence hours after the number of confirmed job losses at Carillion hit 829, with uncertainty persisting over a further 17,500. |
| The MPs published documents that they said indicated “long-term indifference” by former directors towards the company’s pension obligations, leading to “chronic underfunding” of a scheme relied on by 27,000 members. | The MPs published documents that they said indicated “long-term indifference” by former directors towards the company’s pension obligations, leading to “chronic underfunding” of a scheme relied on by 27,000 members. |
| The reports, written by a company advising Carillion’s pension trustees, contain multiple warnings that its plan to plug its deficit stretched over too many years and that the firm diverted money to dividends and debt interest rather than into its retirement schemes. | The reports, written by a company advising Carillion’s pension trustees, contain multiple warnings that its plan to plug its deficit stretched over too many years and that the firm diverted money to dividends and debt interest rather than into its retirement schemes. |
| Labour MP Frank Field, who chairs the work and pensions select committee, said: “Clear warning signs were evident several years ago in the assessments of the company’s commitment to its pension schemes. Yet as late as 2015, [former finance director] Richard Adam, one of the directors appearing before us tomorrow, gave a farcically optimistic report to the pension trustees.” | Labour MP Frank Field, who chairs the work and pensions select committee, said: “Clear warning signs were evident several years ago in the assessments of the company’s commitment to its pension schemes. Yet as late as 2015, [former finance director] Richard Adam, one of the directors appearing before us tomorrow, gave a farcically optimistic report to the pension trustees.” |
| Carillion relies on major contracts, some of which have proved much less lucrative than it thought. | Carillion relies on major contracts, some of which have proved much less lucrative than it thought. |
| Earlier this year it slashed the value of them by £845m, of which £375m related to major public-private partnerships (PPPs) such as Royal Liverpool University hospital. | Earlier this year it slashed the value of them by £845m, of which £375m related to major public-private partnerships (PPPs) such as Royal Liverpool University hospital. |
| As its contracts underperformed, its debts soared to £900m. | As its contracts underperformed, its debts soared to £900m. |
| The company needed a £300m cash injection, but the banks that lent it money refused to put more in. | The company needed a £300m cash injection, but the banks that lent it money refused to put more in. |
| The government also refused to step in and bail the firm out. | The government also refused to step in and bail the firm out. |
| That left the company unable to continue trading and forced it to go into liquidation. | That left the company unable to continue trading and forced it to go into liquidation. |
| The committee published a series of documents written by Gazelle Pension Advisory Services, which was advising trustees of a Carillion pension scheme estimated to have a £990m deficit. | The committee published a series of documents written by Gazelle Pension Advisory Services, which was advising trustees of a Carillion pension scheme estimated to have a £990m deficit. |
| A report produced by Gazelle for the trustees in 2012 warns that “historically, Carillion has subordinated the pension schemes to other demands on cashflow, in particular repaying acquisition debt, a progressive dividend policy and equity payments into PPP [public-private partnership] projects”. | A report produced by Gazelle for the trustees in 2012 warns that “historically, Carillion has subordinated the pension schemes to other demands on cashflow, in particular repaying acquisition debt, a progressive dividend policy and equity payments into PPP [public-private partnership] projects”. |
| The following year, Gazelle flagged up a “relative disparity” between the assessment of the company’s health it was giving to City shareholders and what it was telling pensioners. It said this meant that an increase in pension payments was spread over too many years, leaving retirees bearing “a disproportionate share of risk in the business”. | The following year, Gazelle flagged up a “relative disparity” between the assessment of the company’s health it was giving to City shareholders and what it was telling pensioners. It said this meant that an increase in pension payments was spread over too many years, leaving retirees bearing “a disproportionate share of risk in the business”. |
| NHS•Managed facilities including 200 operating theatres and 11,800 beds•Made more than 18,500 patient meals per day•Helpdesks dealt with 1.5m calls per year•Engineering teams carrying out maintenance work | NHS•Managed facilities including 200 operating theatres and 11,800 beds•Made more than 18,500 patient meals per day•Helpdesks dealt with 1.5m calls per year•Engineering teams carrying out maintenance work |
| Transport•Built 'smart motorways' – which ease congestion by monitoring traffic and adjusting lanes or speed limits – for the Highways Agency•Major contractor on £56bn HS2 high-speed rail project•Upgraded track and power lines for Network Rail•Major contractor on London’s Crossrail project•Roadbuilding and bridges | Transport•Built 'smart motorways' – which ease congestion by monitoring traffic and adjusting lanes or speed limits – for the Highways Agency•Major contractor on £56bn HS2 high-speed rail project•Upgraded track and power lines for Network Rail•Major contractor on London’s Crossrail project•Roadbuilding and bridges |
| Defence•Managed infrastructure and 50,000 homes for Ministry of Defence | Defence•Managed infrastructure and 50,000 homes for Ministry of Defence |
| Education•Designed and built 150 schools•Catering and cleaning contracts at 875 schools | Education•Designed and built 150 schools•Catering and cleaning contracts at 875 schools |
| Prisons•Maintenance and repairs at about half of UK prisons | Prisons•Maintenance and repairs at about half of UK prisons |
| Libraries•Managed several public libraries in England | Libraries•Managed several public libraries in England |
| Energy•Built substations, overhead cables and other works for National Grid | Energy•Built substations, overhead cables and other works for National Grid |
| In an April 2016 report for the trustees of one of Carillion’s 13 pension schemes, Gazelle highlighted that City speculators were betting that the company was in trouble by short-selling their shares. | In an April 2016 report for the trustees of one of Carillion’s 13 pension schemes, Gazelle highlighted that City speculators were betting that the company was in trouble by short-selling their shares. |
| A final report in May 2017 warned that Carillion’s debts had reached a level that meant it could not “counter material financial shocks or disappointments” and pointed out that its pension deficit was now equivalent to the company’s entire stock market value. | A final report in May 2017 warned that Carillion’s debts had reached a level that meant it could not “counter material financial shocks or disappointments” and pointed out that its pension deficit was now equivalent to the company’s entire stock market value. |
| Gazelle advised that only if Carillion “cuts the dividends or produces an alternative plan to reduce debt will the [pension] sponsor constraints be eased”. | Gazelle advised that only if Carillion “cuts the dividends or produces an alternative plan to reduce debt will the [pension] sponsor constraints be eased”. |
| Former Carillion directors are expected to face lengthy questioning at evidence sessions on Tuesday, at the beginning of a joint inquiry by the work and pensions select committee and the business, energy and industrial strategy committee, chaired by Labour’s Rachel Reeves. | Former Carillion directors are expected to face lengthy questioning at evidence sessions on Tuesday, at the beginning of a joint inquiry by the work and pensions select committee and the business, energy and industrial strategy committee, chaired by Labour’s Rachel Reeves. |