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22.05.18

MPs grill Grayling on Carillion and EY ‘conflict of interest’ over HS2 finances

MPs have written to transport secretary Chris Grayling to ask if he was aware that the Big Four accountancy firm EY was advising Carillion on its finances whilst concurrently advising HS2 Ltd on the perilous state of Carillion’s finances.

The correspondence, signed by chairs Frank Field and Rachel Reeves, comes as part of a joint inquiry from the Work and Pensions and Business, Energy and Industrial Strategy committees investigation in to the collapse of Carillion.

The construction giant collapsed on 15 January under an enormous amount of debt. The company, one of Network Rail’s top suppliers, employed roughly 40,000 people globally. In February, over 700 jobs were safeguarded after Carillion’s Network Rail contracts were acquired by Amey Rail Ltd.

The letter to Grayling says that in July 2017, after Carillion’s big contract write-down, HS2 Ltd hired EY to “carry out due diligence checks” on Carillion’s financial state. In the same moth, after being forced to issue a profit warning, Carillion then hired EY to restructure the company – including by improving the company’s “desperate working capital, pension deficit and cashflow problems.”

The bankrupt company was billed a total of £13m by EY for its work between July 2017 and January this year. Almost £11m of this was paid, £2.5m of which was paid on the last day before the construction firm went into liquidation.

Lee Watson, who is a partner at EY, was seconded to the Carillion board of directors as chief transformation officer in September 2017.

However, in evidence given to the joint committees’ inquiry, EY showed it had charged HS2 Ltd £197,000 for financial tests, of which around £29,000 was exclusively attributable to assessing Carillion’s financial ability to continue working on the massive HS2 contract.

The letter from MPs puts 11 questions to the secretary of state on not only if he was aware of all this, but also if he considered it to be a conflict of interest, if any steps were taken to mitigate any such conflict, and on the specific start and end date of EY’s work for HS2.

“Were you aware that EY was simultaneously advising Carillion on its finances and HS2 Ltd on the state of Carillion’s finances?” MPs asked. “If so, when were you first aware?”

It also asks the transport secretary how Carillion performed against the “due diligence checks” carried out by EY.

MPs have promised to publish Grayling’s response once this is received.

Image credit: Yui Mok via PA Wire

 

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