Infrastructure big wig compares firm’s demise to Enron scandal over in the US

Lord Adonis

Lord Adonis

Former National Infrastructure Commission chairman Andrew Adonis has said Carillion’s collapse puts the government at the centre of the storm.

Adonis, a Labour peer who quit the role late last year with a stinging rebuke of Brexit, said in a series of tweets the government now has a lot of explaining to do.

He tweeted: “HMG has big questions to answer. Why were they awarding contracts to Carillion after the exposure of its problems in July? What contingency planning did they do for the collapse? 20,000 jobs & huge projects at stake! More Brexit-induced Whitehall paralysis & incompetence.”

Just a week after Carillion revealed its £845m writedown last July, which saw the firm’s then chief executive Richard Howson go, transport secretary Chris Grayling signed off a pair of contract awards to a Carillion team for work to building two sections of tunnel on the HS2 railway between London and Birmingham.

And Adonis, a former transport secretary in Gordon Brown’s government, said the collapse was reminiscent of Enron – the US energy and services company which went bankrupt in 2001.

He added: “Shades of a British Enron. Wild overbidding, fast-and-loose & grossly overpaid management, taxpayers taken for a ride, AWOL auditors & pliant/ignorant ministers and officials. This is going to run & run!”

And Neil Wilson of broker ETX Capital said government should take its share of blame for the collapse, given last week’s news that City watchdog, the Financial Conduct Authority (FCA), has begun a probe into the timing of Carillion’s Stock Exchange announcements in the seven months up to last July’s news about a £845m writedown.

“Given the government was already up to its neck in this, shareholders have every right to be disappointed. The FCA is looking at the timing of profits warnings but you could also argue that the number and value of government contracts being awarded following those warnings also misled investors by painting a false picture of health.”

He added: “This was a case of bad management and pitching for contracts at any price, but the government and banks could, or may be should, have done more. [Investors] may also question why banks that were bailed out by taxpayers were among those who forced the company to the brink.”