Please wait while the transcript is being prepared...
0:00
Hi. I'm Susan Smith,
an Associate Dean at the University of Sussex Business School,
and also charted accountant.
This talk is about Carillion,
the failure that rocked the accounting profession.
We ask how could anyone have known?
Were the warning signs there?
We chart the five-year period from 2012 to 2016,
using the publicly available accounts to perform a financial analysis.
0:26
Before its collapse, Carillion was one of the UK's largest construction companies.
It had around 43,000 employees,
and many more were dependent upon it through its supply chains and pension schemes.
It went into liquidation owing around two billion to
its 30,000 suppliers and others who traded with it.
Its work for the UK government represented around 38 percent of its revenues in 2016.
In 2017, it was the government's sixth largest supplier.
The alarm bell was raised by an executive, Emma Mercer,
who questioned some of the practices at Carillion in March 2017,
shortly after the accounts have been published.
This led to a profit warning in July 2017,
combined with contract write-downs of 845 million,
increasing to over one billion by September that year.
By January 2018, it was in liquidation.
This led to a dramatic reassessment in response to the complex nature of the contracts,
the wide number of judgments needed to be made and a
range of developments that transpired between March 2017 account sign off and the July profit warning.
The company left 2.6 billion in pension liabilities affecting around
27,000 scheme members who will all now receive reduced pensions.
What made this failure so significant?
Well, the effect on the public sector through the contracts that were
placed at risk and the Pension Protection Fund,
which took on the pension liabilities.
In addition, the government committed 150 million
of public funds to ensure continuity of public services.
