PPF placed Carillion on watch list last Autumn

The Pension Protection Fund (PPF) placed Carillion on its watch list last autumn and was aware of the construction firm’s financial plight for "some time".

A spokesperson for the pensions lifeboat confirmed that Carillion was placed under observation by the PPF, a measure it takes when a sponsoring employer looks like it might become bankrupt.

The PPF said that it had been tracking Carillion’s financial situation for some time, but concerns escalated towards the end of last year. The firm entered insolvency on Monday (15 January 2018).

The defined benefit pension schemes of Carillion will now enter the PPF, after the company reported a £587m pension deficit in 2017. The firm currently looks after 13 final salary pension schemes with 28,500 members.

It has been reported that the PPF could take up to a £900m hit after the construction firms liquidation, a substantial proportion of its £6.1bn of reserves as of July 2017.

On Tuesday, Business Secretary, Greg Clarke, ordered a fast-track investigation into the directors of Carillion.

The investigation, which is set to be extended in size and scope, will look into previous directors of the company to determine whether the firm was mismanaged.

It comes a day after Liberal Democrat MP, Stephen Lloyd, called for a parliamentary inquiry into the collapsed Carillion, after submitting an early day motion in Parliament.

In addition, Lloyd called the decision of Secretary of State for Transport, Chris Grayling, to continue to award contracts to the firm “lamentable”, and said that he should consider his position in government.

Work and Pensions Select Committee chair, Frank Field, agreed: “Carillion took on mega borrowings while its pension deficit ballooned. We called over a year ago for TPR to have mandatory clearance powers for corporate activities like these that put pension schemes at risk, and powers to impose truly deterrent fines that would focus boardroom minds.

“If government had acted then, the brakes might have been put on Carillion’s massive ramping up of debt and it never would have fallen into this sorry crisis. It seems we have a new case like this every week, and this one is particularly disastrous ... I would like to ask the government today: what more is it going to take?”

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