MPs began an investigation into Carillion's pension deficit, amid suggestions that The Pensions Regulator and the firm's pension trustees failed to act after the 2017 profit warnings, putting pensions at risk. Carillion operated 13 UK pension schemes, with around 27,000 members, of whom over 12,000 already received pensions. Despite initial estimates of a £587M deficit, reports suggested the true figure could be between £800M and £2.6bn; on 29 January 2018, Frank Field, chair of the Work and Pensions Select Committee accused Carillion of trying to "wriggle out" of pension payments, resulting in a £990M deficit. Pensions advisers were said to have repeatedly warned that Carillion was prioritising shareholder dividends over the funding of its pension scheme.
Carillion directors, trustees of the company's pension scheme, and the Financial Reporting Council were summoned to appear before the House of Commons Business and Work and Pensions Select Committees on 30 January and 6 February. Directors were also summoned before the Public Accounts Committee on 27 February 2018.
The Business and Work and Pensions Select Committees also wrote to the 'Big 4' firms, KPMG, EY, PwC and Deloitte, asking for detailed accounts of services offered to Carillion, its subsidiaries and pension scheme since 2008, and what fees were received. At 30 January hearing, Frank Field asked the FRC's head Stephen Hadrill whether the 'Big 4' should be broken up in the wake of Carillion's collapse. On 13 February, the 'Big 4' were described by Field as "feasting on what was soon to become a carcass" after collecting fees of £72M for Carillion work during the years leading up to its collapse. It later emerged that Carillion paid £6.4M to 12 firms of advisers the day before pleading for an emergency £10M loan from the UK Government; £2.5M was paid to Ernst and Young, with other large payments to Slaughter and May (£1.2M), FTI Consulting (£1M) and Lazard and Co (£0.5M).
In 6 February hearings, Carillion directors blamed the company's collapse on problem contracts (including two hospital PFI projects – in Liverpool and Birmingham – with cost overruns), high levels of debt arising from the 2011 acquisition of Eaga, plus Brexit, the 2017 General Election and interest rates. The company also claimed it was owed £200M in relation to the Msheireb Downtown Doha project in Qatar – former CEO Richard Howson said he felt like "a bailiff" in chasing the debt. (Carillion's claim was subsequently disputed by Msheireb Properties, with the Qataris prepared to testify to the select committees, providing written evidence to them, and said to be considering a £200M claim against Carillion.) MPs on the two select committees also discussed documents showing that Carillion investor Standard Life had expressed concerns over the company's financial management, strategy and corporate governance in 2015. After the session, committee chairs Frank Field and Rachel Reeves said:
This morning a series of delusional characters maintained that everything was hunky dory until it all went suddenly and unforeseeably wrong. We heard variously that this was the fault of the Bank of England, the foreign exchange markets, advisers, Brexit, the snap election, investors, suppliers, the construction industry, the business culture of the Middle East and professional designers of concrete beams. Everything we have seen points the fingers in another direction – to the people who built a giant company on sand in a desperate dash for cash.
After considering the directors' evidence, MPs on the select committees sought further information, particularly where they felt testimony had been "contradictory" or evasive. Other organisations including Msheireb, lawyer Slaughter and May, bankers Lazard and Morgan Stanley, and the clients of three UK PFI projects, were also contacted about their involvement in Carillion's collapse. Published correspondence between shareholders (including Kiltearn, Standard Life and Letko Brosseau) – described as "fleeing for the hills" – and Carillion showed repeated efforts to raise issues with directors with the interim CEO Keith Cochrane said to have only a vague grasp of finances.
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Further correspondence showed "contemptuous" Carillion directors had repeatedly refused to fund growing deficits in the company's 13 pension schemes, while pension fund trustees had unsuccessfully sought intervention from The Pensions Regulator in 2010 and 2013. Despite these requests, the regulator only opened the process after Carillion entered liquidation. On 22 February 2018, the Pensions Regulator told a joint select committees hearing that it was considering pursuing individuals connected with Carillion to recover cash for its indebted pension schemes, but was criticised for not forcing Carillion to pay sufficient money into its retirement schemes.
On 22 February 2018, MPs also contested evidence from internal auditor Deloitte and external auditor KPMG (in one exchange MP Peter Kyle told KPMG partner Peter Meehan: "I would not hire you to do an audit of the contents of my fridge"). Rachel Reeves, chair of the business select committee, said:
Auditing is a multi-million-pound business for the Big Four. On this morning's evidence from KPMG and Deloitte, these audits appear to be a colossal waste of time and money, fit only to provide false assurance to investors, workers and the public. [...] Carillion staff and investors could see the problems at the company but those responsible – auditors, regulators, and, ultimately, the directors – did nothing to stop Carillion being driven off a cliff.
Carillion directors' testimony was further questioned when, on 21 February 2018, a whistle-blowing former Carillion executive told The Guardian the company had been in serious financial difficulty in mid-2016 but directors had been "placating the City." Zafar Khan's successor as finance director, Emma Mercer, was also reported to have voiced concerns about accounting irregularities in April 2017 and at a board meeting on 9 May 2017 which received legal advice from Slaughter and May.
After further documentation and correspondence was published by the select committees, Carillion directors bosses were described by MPs as "fantasists" chasing "a pot of gold", with chairman Philip Green described by Rachel Reeves as having "either a woeful lack of leadership or no grip on reality." The board rejected an October 2017 break-up plan from EY that proposed selling off profitable parts of Carillion and then entering liquidation, a strategy that could have raised £364M, with the pension schemes getting £218M; the board believed they could successfully restructure the group. A 2017 report to Carillion's banks from FTI Consulting said the firm hid mounting problems with "aggressive accounting and working capital management."
Interviewed by the joint Business and Work and Pensions Committee on 7 March 2018, key Carillion investors Aberdeen Standard Investments, Kiltearn and Blackrock said the board focused more on their own pay than the company's performance, and questioned KPMG's auditing of the 2016 accounts. The protection of directors' pay extended to the creation of a secret bank account for former CEO Richard Howson's share-related bonuses.
PricewaterhouseCoopers told the Work and Pensions Select Committee on 21 March 2018 that its services over the first eight weeks of the liquidation had cost £20.4M; this followed MPs' accusations that PwC had been attempting "to milk the Carillion cow dry". In February 2019, it was reported that PwC received £44.2M for one year's work on Carillion's insolvency; the firm had 38 people working on the insolvency, down from 155 in 2018. In November 2019, PwC said it had received nearly £53M in fees associated with the liquidation, and had 15 insolvency specialists working on the case.
Two days before 16 May 2018 publication of the parliamentary inquiry report, Frank Field said Carillion had "displayed utter contempt for its suppliers", using them to "prop up a failing business model" and conceal true levels of debt. The report was also expected to recommend that the Insolvency Service should consider disqualifying some former Carillion directors from future boardroom positions, and that The Pension Regulator be scrapped and replaced by a new, more powerful body.
National Audit Office investigations
In June 2018, the National Audit Office published its investigation into the collapse of Carillion, criticising the government for not spotting financial problems at a key supplier sooner. The report also highlighted that accountants and lawyers managing the liquidation were set to earn £70M in fees, with special manager PwC set to receive £50M. It was forecast that the collapse would cost the UK taxpayer £148M, though later estimates put the cost at over £150M, potentially £180M.
The chairs of the Parliamentary select committees enquiry, Frank Field and Rachel Reeves responded to the NAO report. Field said Carillion had "hoodwinked" the government and viewed PwC's involvement in managing the liquidation as a potential conflict of interest. Reeves said: "The dice are loaded in the Big Four's favour. They make a killing in fees advising struggling companies how to turn them round and then they pocket millions tidying up when that advice fails." In August 2018, it was reported that PwC billed for £20.4M in fees during the first eight weeks of the insolvency, charging an average of £356 an hour, with the Official Receiver, David Chapman, alone billing almost £300,000.
In August 2018, former Auditor-General Sir John Bourn told a Channel 4 Dispatches programme that Carillion was "like a Ponzi scheme" while Government scrutiny was "inadequate".
In October 2018, the Guardian reported a National Audit Office finding that in 2015 civil servants working for Health Secretary Jeremy Hunt had lobbied the Cabinet Office to stop failing Carillion hospital projects, including the Midland Metropolitan and Royal Liverpool University hospitals, from being overseen by the Major Projects Authority, an independent watchdog.
Legal actions
In November 2020, 143 former Carillion staff, supported by Unite, argued that they were not properly consulted on the redundancy process, but their plea for compensation was rejected at an Employment Appeal Tribunal. The tribunal's decision was upheld by an appeal judge in January 2022.
In spring 2021, some individuals sought support to bring a class action against the former directors.
Accounting investigations
On 29 January 2018, it was reported that Carillion's auditor KPMG would have its role examined by the Financial Reporting Council (FRC). In March 2018, the FRC's conduct committee announced an additional investigation into the conduct of former Carillion finance directors Richard Adam and Zafar Khan (both members of the ICAEW), focusing on the preparation and approval of Carillion's financial reports for 2014, 2015 and 2016, and the six months to 30 June 2017, as well as provision of other financial information from 2014 to 2017. Initial interviews had been undertaken by May 2018, with more to follow; tens of thousands of documents were to be reviewed as part of the FRC's investigation looking at 'contract accounting', 'reverse factoring', 'pensions', and 'good and going concern'. The FRC investigation was later extended to review earlier Carillion reporting in 2013. In November 2019, the FRC gave an update on the progress of four investigations (two concerning auditing, two relating to possible director misconduct). A decision on enforcement action on auditing matters would be made before the end of 2019, it said, while a decision on directors' conduct would be taken by March 2020. In January 2020, the FRC said the scale and complexity of the investigations meant publication of its first report would be delayed to summer 2020. The FRC's first report, which found a number of breaches, was delivered to KPMG in September 2020; the FRC was awaiting a KPMG response before deciding whether to take enforcement action. In March 2021, KPMG was reported to be "inching towards a financial settlement with regulators" over its auditing of Carillion, with the FRC expected to impose a record fine, possibly around £25m, on KPMG for its failings.
Business secretary Greg Clark told the work and pensions committee on 21 March 2018 that he planned an independent inquiry into the operations of the FRC following Carillion's collapse. In November 2018, it was announced that Stephen Haddrill, CEO of the FRC, was to quit, and suggestions that his departure might lead to the body's abolition. In March 2019, the government announced that the FRC would be replaced by a new regulator, the Audit, Reporting and Governance Authority, with enhanced powers, in an effort to "change the culture" of the accounting sector.
In June 2018, it was reported that KPMG and Carillion bosses had maintained a £329M valuation of goodwill relating to the former Eaga business (later Carillion Energy Services), despite huge losses. Ignoring the impairment meant they could continue to pay dividends and directors' bonuses, including £1.8m each paid to Richard Howson and Richard Adam.
In a June 2018 report on audit standards across eight accounting firms, the FRC identified "failure to challenge management and show appropriate scepticism across their audits." It highlighted a decline in the quality of work undertaken by the Big Four, with KPMG performing the worst. There had, the FRC said, been an "unacceptable deterioration" in the quality of KPMG's work, and the FRC would scrutinise KPMG more closely as a result. Itself under pressure to improve, in October 2018, the FRC proposed reforms, including banning audit firms from earning consultancy fees at businesses they audit, to tackle the "underlying falling trust in business and the effectiveness of audit," and severely rebuked KPMG.
Actions against KPMG
In January 2019, KPMG announced it had suspended the partner that led Carillion's audit and three members of his team; in August 2021, an FRC disciplinary panel was scheduled for 10 January 2022 to hear a formal complaint against KPMG and former KPMG partner Peter Meehan regarding the provision of allegedly false and misleading information concerning the 2016 Carillion audit. At the disciplinary hearing in January 2022, KPMG's UK chief executive Jon Holt said the firm had discovered misconduct by it staff in its own internal investigations, and immediately reported it to the FRC. Following the FRC tribunal, KPMG was fined £14.4M (one of the biggest penalties in UK audit history) for misconduct relating to its audit of Carillion and another firm, and received a "severe reprimand" from the regulator. KPMG were also ordered to pay £3.95M in costs. The tribunal heard allegations that KPMG staff created false meeting minutes and retroactively edited spreadsheets before sharing them. A further tribunal considered penalties for individual KPMG staff, including partner Peter Meehan; the FRC recommended that he be banned for 15 years and fined at least £400,000. In July 2022, it was announced that he had been fined £250,000 and banned for ten years; three other former KPMG executives also received fines and lengthy bans. A junior member of KPMG staff, Pratik Paw – who, aged 25, had been the most junior member of the Carillion audit team – faced a "life changing" fine of £50,000 and a four-year ban, prompting critics to suggest that accounting firms should enable junior colleagues to challenge their superiors, so that low ranking workers are not blamed for accounting scandals. Ultimately, Paw was not fined or suspended but was severely reprimanded.
Also in January 2019, the FRC opened a second investigation into how KPMG audited Carillion's accounts; the FRC's initial investigation report was delivered to KPMG in February 2021. In May 2020, it was reported that the Official Receiver was preparing to sue KPMG for £250M over alleged negligence in its audits of Carillion. In May 2021, the liquidator secured funding for this legal action, with speculation about the likely damages claim rising to as much as £2 billion. The Official Receiver's formal claim against KPMG was lodged on 19 November 2021, potentially one of the biggest claims ever made against a UK accountancy firm. In February 2022, Sky News reported the Official Receiver's claim would be in the range of £1bn-£1.5bn, with one source suggesting around £1.2bn. The OR's negligence claim focuses on the value of major contracts which were not properly accounted for in audits in 2014, 2015 and 2016, resulting in misstatements in excess of £800M within Carillion's financial reports. KPMG was said to have accepted management 'misstatements' for inflated revenue and understated cost positions at 20 projects including the Royal Liverpool Hospital, redevelopment of Bristol's Southmead Hospital, the Aberdeen Western Peripheral Route, and works at Gatwick and Stansted airports. The OR had received legal advice that KPMG was answerable to Carillion's creditors for a portion of their losses. KPMG said: "We believe this claim is without merit and we will robustly defend the case. Responsibility for the failure of Carillion lies solely with the company's board and management, who set the strategy and ran the business." In November 2022, the OR said: KPMG had "failed to respond" to Carillion allegations that it had failed to properly audit the accounting of 20 significant construction contracts. KPMG reiterated that Carillion's failure was solely the fault of the company's board and management. In February 2023, The Guardian reported that KPMG had settled the £1.3 billion lawsuit brought by Carillion's liquidators; details of the settlement were not made public.
In October 2023, the FRC fined KPMG £21 million for its mishandling of Carillion's accounts, saying it had failed to follow "the most basic and fundamental audit concepts" and an "unusually large number of breaches" had been found. For three years before the collapse Carillion was not subject to reliable audits. KPMG would also pay legal costs of about £5.3 million. The previous year a £14.4 million penalty was imposed on KPMG for providing misleading information to the regulator.
Actions against former Carillion directors
In addition to its initial investigation into the timeliness and content of Carillion's financial announcements, the Financial Conduct Authority said its investigation would extend to allegations of insider trading in Carillion shares prior to its trading update on 10 July 2017. In November 2020, the FCA said some Carillion directors had "acted recklessly" and released "misleadingly positive" market updates before it collapsed, singling out updates issued on 7 December 2016, 1 March 2017 and 3 May 2017. As a result, the FCA said it had sent notices to some former Carillion directors warning of possible enforcement action (possible sanctions include public censure, fines and suspensions from holding certain positions). In January 2021, the Insolvency Service said it would seek to ban eight former Carillion directors from holding senior boardroom positions, namely: Philip Green, Richard Howson, Keith Cochrane, Richard Adam and Zafar Khan, and non-executive directors Andrew Dougal, Alison Horner and Ceri Powell. The directors contested the action. In July 2022, the FCA announced it had would fine Howson £397,800, Adam £318,000 and Khan £154,400; it said the trio had made "misleadingly positive statements" and had "acted recklessly". The three former directors appealed to the Upper Tribunal (Tax and Chancery Chamber) against the penalties, and in July 2025, it was announced their appeals would be heard in February 2026. However, in January 2026, Adam and Khan withdrew their FCA challenges and agreed fines reduced by 10% (to £232,800 and £138,900 respectively), reflecting their cooperation with FCA investigations and an adjustment to Adam's fine following a recalculation of his earnings. The following month, shortly before his appeal was due to be heard at London’s Upper Tribunal, Howson also withdrew his FCA challenge and agreed a fine reduced to £237,700, reflecting his cooperation with the FCA and a recalculation of his earnings.
In July 2023, the Insolvency Service announced that Khan and Adam had been disqualified from acting as company directors for 11 years and 12.5 years respectively. In October 2023, Howson was disqualified from being a director of a company for eight years. The Insolvency Service was also pursuing cases against other former Carillion directors, but a trial due to start on 16 October 2023 was cancelled after the Insolvency Service decided it was not in the public interest to pursue ex-chair Green, interim CEO Cochrane and non-executive directors Dougal, Horner and Powell. The Insolvency Service spent £11M pursuing director disqualifications against the eight former Carillion directors.
In addition to the FCA and Insolvency Service actions, in 2026 the Financial Reporting Council fined Adam and Khan £222,019 and £60,228 respectively. They were also excluded from the Institute of Chartered Accountants in England and Wales for 15 and 10 years respectively. Concluding its investigation into the firm’s collapse, the FRC also imposed fines and bans on three other (unnamed) former Carillion senior accountants who "acted recklessly and failed to act with integrity in connection with the preparation of accounting information for Carillion's financial statements, prior to the company's collapse in 2018."
Call for criminal investigation
In September 2018, the Unite union called for a criminal investigation into the behaviours of Carillion's management – a call repeated in January 2019, the first anniversary of the company's collapse, and on 2 September 2019, 600 days after Carillion's collapse.
