Ex-Carillion director says Brexit and snap election led to firm’s collapse
The former finance director of Carillion has blamed the Brexit vote and last year’s snap election for holding back the now collapsed firm from winning major contracts.
The construction firm, which oversaw a number of Government projects, went into compulsory liquidation in January, with debts totalling around £1.5bn, leaving tens of thousands of jobs at risk.
Zafar Khan, who left the firm in September, told MPs failure to win further business as "largeish" contracts came to an end prompted cash flow problems which then led to the firm’s collapse.
“In the UK business we had a number of contracts essentially coming towards completion and our working assumption [was] that we would replace those volumes and we had a good pipeline of opportunities to do that, in fact contracts that we signed up as preferred bidders,” he told parliament’s Work and Pensions Committee.
The former finance chief, who was handed a £425,000 pay off, added that the impact of Brexit and Theresa May’s decision last April to call for an early election had affected the UK construction side of the business.
“The challenges we had in ’17, were a number of things coming together at the same time.
“Not replacing those volumes, and coming into the year as I say, we had some contracts we were preferred bidders for, but they continued to drift out to the right because of the Brexit related uncertainty, and that was amplified by the general election announcement, and in my mind that had an impact on ability to replace contracts that were coming up.”
Mr Khan faced the select committee grilling alongside his successor in the role, Emma Mercer, and former chief executive Keith Cochrane.
MILKING A 'CASH COW'
Tory MP Heidi Allen rounded on the firm’s top brass accusing them of not costing their margins properly, adding that otherwise they would not be so “desperate and hungry for more business”.
After Mr Khan insisted the company was not taking on “volumes for the sake of volumes”, she hit back: “But it was volumes though. It seems to me anyway that Carillion was taking on excessive numbers of contracts purely as a means to keep the cash flow going.”
“These were not profitable pieces of businesses, they were just there to milk a cash cow.”
Committee Chair Frank Field blasted the firm's model as a “house of cards” that could fall down in any moment.
He said: “There was no fall back position, if you just failed somehow to get these contracts, the whole thing came down.”
Mr Cochrane later told the Work and Pensions Committee he was “truly sorry” for Carillion’s collapse.
“It was the worst possible outcome. This was a business worth fighting for,” he added.
“That's what I sought to do during my time as chief executive.”