PwC’s Carillion role may be ‘massive conflict of interest’
PwC’s multiple roles advising Carillion, as well as the company’s pension fund and the Government, could look like a “massive conflict of interest” according to MPs.
The Big Four accountancy firm initially worked for Carillion up until November 2016. Months later PwC began advising pension fund trustees in dispute with the struggling company about how much it should pay into its retirement scheme.
PwC was then appointed by the Government to advise on how much money could be salvaged from Carillion after it collapsed in January with £900m debt and a £590m pension deficit. The accountancy firm was involved in Carillion “at every stage” said Conservative MP Heidi Allen at a joint session of the Commons business and pensions committees yesterday.
“To the outside world that would look like a massive conflict of interest. Can you talk to us about how that could possibly best serve the interests of the pensioners involved?” she asked three PwC partners, David Kelly, Gavin Stoner and Marissa Thomas.
Ms Thomas said her firm was subject to the accountancy industry’s ethical code and implemented a “rigorous client acceptance procedure” when new work was taken on. Ms Allen asked how PwC counteracted the incentive to use confidential client data to its advantage when pitching for additional work with companies or their pension fund trustees.
“In terms of using client data we may have from different assignments, where we have full permission from clients to do so we will use the data, where we don’t have permission, we don’t,” Ms Thomas said. When pressed to outline specific measures that would prevent a conflict arising, she said there was a gap of “some seven or eight months” between PwC’s work for Carillion ending and work for its pension fund trustees beginning.
“We did, however, put ethical walls in place, including physical separation of teams when they are working on that relevant situation, lockdown of data, physical and digital, and also the appointment of an ethical wall officer for the team,” she said.
The comments came as Business Secretary Greg Clark came under increasing pressure to break up the Big Four firms who have a stranglehold on auditing the UK’s largest companies.
Asked yesterday whether KPMG, Deloitte, PwC and EY should be reduced in size, Mr Clark said: “I don’t want to answer that without considering advice on the consequences. In general, I agree... that more competition tends to act in the interests of consumers and innovation. When you have a concentrated market, that is not a good state of affairs. I will take an interest in whether further reforms are needed, including the suggestion you made [about a break-up].”
MPs said the four firms collected more than £70m between them from Carillion in the decade running up to the company’s collapse. EY was paid £2.5m for its services just days before Carillion entered liquidation, while thousands of smaller contractors were left out of pocket.
Rachel Reeves, chair of the Business, Energy and Industrial Strategy Committee, said: “Many companies had been waiting for 120 days for payment from Carillion. It just cannot be right that companies pay a big company for work on time, but the smaller companies that have been waiting much, much longer and, in my view, are much more deserving of the money don’t get paid.”