Julia Irvine 7 Jun 2018 11:12am

PwC quizzed over £50m Carillion fees

MPs have written to PwC and the Official Receiver asking about potential conflicts of interest and fees arising from the Big Four firm’s appointment as special manager to Carillion’s liquidation

As part of their joint inquiry into the construction services company’s collapse, Rachel Reeves and Frank Field, chairs of the Business, Energy and Industrial Strategy and the Work and Pensions committees respectively, want to know whether it is true PwC is to be paid £50m for its work on Carillion, how much it has received so far and the reason for the 20% premium on services provided post liquidation revealed in the National Audit Office’s report on the government’s handling of Carillion’s collapse.

The chairs also ask the firm to clarify the actions it has taken – whether under pressure from the Official Receiver or voluntarily – to manage conflicts of interest with previous work that it carried out for Carillion and with advice it gave to Carillion directors who are currently being investigated by the Insolvency Service.

In the past 10 years, the work PwC has carried out for Carillion includes auditing Alfred McAlpine and EAGA (2007 to 2013); provided pensions consulting advice on managing liabilities (2012 to 2017); seconded staff to work on internal audit, finance and M&A (2007 to 2014); and due diligence services in connection with to divestments and acquisitions (2008 to 2015).

For the first three of these services, the firm was paid fees of £4.478m.

It was also involved in advising some of the group’s pension schemes, which included advising Carillion (DB) Pension Trustee Ltd on Carillion’s restructuring proposals. As the chairs point out, the six schemes the trustee company represented are all major creditors of Carillion.

PwC was brought in last September to advise the government on the group’s financial difficulties and it was then appointed special manager to the liquidation in January this year.

Reeves and Field find the firm’s appointment worrying since it is working with the Official Receiver, which is part of the Insolvency Service. The insolvency in turn is responsible for managing Carillion’s liquidation and deciding whether to take disqualification proceedings out against Carillion’s former directors.

In their letter to the Official Receiver, they express concern that PwC’s conflicts of interest might jeopardise possible actions against the former directors and ask whether the Insolvency Service has considered hiring a second firm to help in the investigations.

In a statement, PwC said that the Official Receiver had applied to the court to appoint the firm to resource a liquidation of exceptional size and complexity as quickly and effectively as possible.

“Since then our priority has been to keep public services, such as the maintenance of prisons, hospitals, roads and schools, running safely across the country – minimising the disruption caused by the collapse – while transferring contracts and saving thousands of jobs. 

“We understand concerns over the cost of the liquidation. However, without this work the cost to UK jobs, the economy and the taxpayer would be considerably higher.”

It added that from the outset it was clear that its fees would be subject to scrutiny and approval by the Official Receiver and the court.