MPs have accused Carillion of displaying ‘utter contempt’ for its suppliers by using them as a line of credit to shore up its balance sheet while concealing the scale of its debt.
Ahead of Wednesday’s launch of the final report of their inquiry into the collapse of the infrastructure giant, two parliamentary committees have published evidence from Santander, the bank that operated Carillion’s Early Payment Facility (EPF).
Former Carillion managers at an inquiry hearing
They said that despite being signatories of the Prompt Payment Code, Carillion was a notorious late payer, which forced standard payment terms of 120 days on suppliers. Suppliers could get paid earlier if they took a discounted payment.
The committees pointed out that two major credit ratings agencies have claimed that Carillion's accounting for their EPF concealed its true level of borrowing from financial creditors. One has claimed that as much as £498m was misclassified as a result.
Frank Field MP, chair of the Work and Pensions Committee, said: ‘Carillion displayed utter contempt for its suppliers, many of them the small businesses that are the lifeblood of the UK’s economy.
‘The company used its suppliers as a line of credit to shore up its fragile balance sheet, then in another of its accounting tricks “reclassified” this borrowing to hide the true extent of its massive debt. This knocks down for good the stance of the Carillion board that whingeing and blaming others can be any defence.’