The Collapse of Carillion

Published Friday, January 19, 2018

Carillion entered compulsory liquidation on 15 January 2018. This briefing looks at the causes and consequences of Carillion’s collapse. It will be updated soon to cover more topics.

Compulsory liquidation

A compulsory liquidation order was made against Carillion, on the petition of the companies’ directors, on 15 January 2018. Compulsory liquidation is a court-based procedure through which company assets are realised for the benefit of creditors.

Various business commentators have suggested that Carillion went into compulsory liquidation rather than administration because it had no real assets left to sell. It had contracts, but they were either too complex or insufficiently valuable for the banks to lend against.

The High Court appointed the Official Receiver as liquidator. The court also appointed 6 executives of PwC as Special Managers to assist the Official Receiver. The liquidator must act in the interests of the body of creditors as a whole.

It is a feature of the Carillion liquidation that the Official Receiver is expected to prioritise the continuity of vital public services while securing the best outcome for creditors. Unless told otherwise, all employees, agents and subcontractors providing public services are being asked to continue to work as normal and they will be paid for the work they do during the liquidations by the Official Receiver. The Government has undertaken to provide the necessary funding required by the Official Receiver to maintain public services carried on by Carillion staff, subcontractors and suppliers.

Carillion has only been in compulsory liquidation a few days. It is too early to predict what, if anything, creditors will recover. The Special Managers have already said that there is no prospect of any return to Carillion shareholders. The Insolvency Service has also announced that bonuses and severance payments have not been made to directors since the date of the company’s collapse.

On 16 January 2018, the Government announced that the Official Receiver’s investigation into the causes of the failure of Carillion is to be fast-tracked. The investigation is to look at the conduct of directors in charge at the time of the company’s insolvency and also the conduct of previous directors, to determine whether their actions might have caused detriment to the company’s creditors (including detriment to any employees who are owed money or to the pension schemes).


On 10 July 2017, Carillion announced that its profits would be hit to the tune of £845 million. As a consequence, its chief executive resigned and there would be no dividends that year. The shares lost more than half of their value in the two days that followed the announcement.

Although the July 2017 profit warning marks the beginning of the end for Carillion, it is poor decisions in the years leading up to it that caused the company serious trouble. Of the £845m charge, Carillion said that £375m related to the UK (mostly three PPP projects) and £470m to overseas markets (mostly exiting markets in the Middle East and Canada).

On 29 September 2017, Carillion’s half-year financial statementsrevealed a total hit to the company’s worth of £1.2 billion – enough to wipe out the profits from the previous eight years put together.

In the eight years from 2009 to 2016, Carillion paid out £554 million in dividends, almost as much as the cash it made from operations. In the five years from 2012 to 2016, Carillion paid out £217 million more in dividends than it generated in cash from its operations.

Over the eight years from December 2009 to January 2018, the total owed by Carillion in loans increased from £242 million to an estimated £1.3 billion – more than five times the value at the beginning of the decade.

Source: Carillion’s annual financial statements; * Interim financial statement for the six months ended 30 June 2017; ** Financial Times(16 Jan 2017)

Commons Briefing papers CBP-8206  Authors: Lorraine Conway; Federico Mor


The full report can be found here –  CBP-8206