£2.6billion

Outrage as it’s revealed Carillion’s pension black hole is FIVE TIMES bigger than feared

BANKRUPT construction giant Carillion has a black hole in its pension fund of up to £ 2.6 billion – five times larger than first thought.

The true scale of problems at the company is becoming clearer every day as pressure grows for answers as to how bosses let it get into such a devastating state.

Wolverhampton-based Carillion went into compulsory liquidation on Monday, saying it owed £3 billion and had only £29 million in the bank. Ministers and unions are now scrambling to keep up its 450 contracts with the Government and save 20,000 jobs in Britain.

The firm has calculated its pension deficit – the gap between the promised retirement incomes it has made to workers, and the assets it has to pay for them – at £587 million. However, new analysis suggests it could be as high as £2.6 billion, bringing the total the firm owes to £5 billion.

Last night it was claimed Carillion was owed £40 million by the Government when it went into liquidation, while several small firms complained they were owed money by the company, sometimes stretching back four months. Parliament’s liaison committee, made up of all select committee chairmen, has opened an investigation into the firm.

Labour MP Frank Field, who chairs the work and pensions committee, said: ‘One of the aspects our committee will be looking at is the role of the auditors who say a business is a going concern then months later it falls apart.

‘Shouldn’t auditors be taking into account when they say it’s a going concern, a pension deficit they cannot meet? This makes it even worse. And my feeling is, unfortunately, the picture is getting worse not better.’

The 28,500 members of Carillion’s pension schemes are likely to take cuts of around 10 per cent to their nest eggs as the schemes fall into the Pension Protection Fund (PPF). Sarah McMonagle, of the Federation of Master Builders, which represents thousands of construction firms, said: ‘This is a huge upward revision in the size of the Carillion’s pensions’ defiwere cit from that being talked about earlier this week. It underlines again the extent of the company’s financial woes.

‘Luckily, the PPF is there to offer some protection to workers whose pensions are impacted. Unfortunately, there’ll be no such protection for the many small firms that working within Carillion’s supply chain, many of which have little choice but to take their chances working in the supply chain of a company whose finance management they had no control over.’

Despite its growing pension deficit, Carillion paid shareholders £458 million in dividends between 2011 and 2016, increasing the payment each year. Chief executive Richard Howson, 49, who quit in July, was paid £1.5 million during 2016 while finance boss Richard Adam, 60, was paid £1 million.

A row exploded this week when it emerged they were due to continue receiving payments after the collapse, but the Insolvency Service has now ended severance and bonus payments. Business Secretary Greg Clark has asked the Insolvency Service to fast-track its investigation and include directors who left the firm before the insolvency.

Carillion is also being investigated by the City watchdog the Financial Conduct Authority over whether it should have warned investors earlier about its finances.

Mike Cherry, chairman of the Federation of Small Businesses, said: ‘Lessons have to be learned from this sorry episode. Otherwise, we risk more Carillions. The construction industry is the worst sector for poor payment practices.’

‘Underlines the financial woes’

JUST when we thought the Carillion debacle couldn’t get any worse, we’re told the black hole in the company’s pension fund is much deeper than first thought – possibly a terrifying £2.6billion.

With typical opportunism, Jeremy Corbyn says the collapse is proof that only the public sector can deliver public services. It’s a bogus argument of course – as we discovered to our huge cost in the 1970s.

But there must be a public inquiry. It must be thorough and – unlike the interminable BHS probe – must be completed in months not years.

Unless it can provide urgent answers to the glaring questions thrown up by this disaster, the Government’s credibility could be gravely undermined.