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The Carillion Group – Regulatory intervention report

This report outlines the investigation we opened to establish the circumstances that led to the insolvency of the Carillion Group and the impact on the pension savers.

Case summary

The Carillion Group went into insolvency in January 2018, brought down by the unsustainable level of its debt and an £845 million write-down in the value of several major long-term construction contracts. We immediately opened an investigation to establish the circumstances that had led to the insolvency and the impact on the pension savers. We engaged with other agencies (the Financial Conduct Authority (FCA), the Financial Reporting Council (FRC) and The Insolvency Service (INSS)) who were also opening their own regulatory investigations.

Our investigation primarily focused on whether any activities in respect of the insolvency, and the events and circumstances leading up to it, could provide grounds for us to take enforcement action, particularly through the use of our anti-avoidance powers.

Based on our assessment of the evidence we obtained, and our review of the material provided by the other investigating agencies, we are satisfied that there is no basis for using our powers and we have therefore decided to close our investigation.   


Carillion PLC was a global provider of construction and support services to public and private sector clients. There were around 350 entities within the Group structure, 19 of which were participating employers to 13 defined benefit pension schemes, which had a combined estimated deficit on a buy-out basis of circa £1.8 billion at the end of 2016.

In July 2017, Carillion PLC issued a profit warning following a review of its material contracts by its auditors, KPMG LLP. This review led to the unexpected announcement of a new provision in the accounts of £845 million. The share price of the business was materially impacted by this announcement and the CEO (Richard Howson) and CFO (Zafar Khan) were replaced. It also resulted in an outflow of circa £150 million in 2017-18. This put the Group’s liquidity under extreme pressure and the Group’s market capitalisation fell from £1.3 billion in March 2016 to £184 million at the end of 2017.

Carillion PLC entered into compulsory liquidation on 15 January 2018 and we opened an anti-avoidance investigation on 18 January 2018. The liquidation triggered PPF assessment for the 13 schemes.

In addition to our case, investigations into the actions of those involved were opened by the INSS, the FCA and the FRC. We set up a working group with these other agencies to share, where appropriate, relevant information and material from our respective investigations using the appropriate statutory and other formal information sharing gateways.

The FCA and the INSS[1] concluded from their investigations that there were grounds to pursue their respective powers (in the case of INSS, the powers being those of the Secretary of State) based on their respective investigations’ findings of governance and reporting failings.

In addition, the Official Receiver (acting as the liquidator of the Carillion Group) issued high court proceedings against KPMG in January 2022, claiming damages of £1.3 billion for alleged negligent audits of Carillion PLC’s financial statements.

Footnotes for this section

  • [1] The FRC’s investigations into the audit, preparation and approval of the financial statements of Carillion PLC is ongoing and no formal findings have yet been made.

Our investigation

Our investigation focused on whether there were grounds to use our anti-avoidance powers (specifically our Contribution Notice power) and principally involved two strategies:

  1. Reviewing transactions leading up to the insolvency: We investigated whether there was any evidence of avoidance activity in connection with the transactions and disposals that had taken place within the Carillion Group in the years leading up to the insolvency.
  2. Working together with other agencies: From the outset, we actively engaged with the other investigating agencies using information sharing arrangements and our statutory powers to consider whether they had uncovered information or material that could support the use of our powers. 


We obtained evidence about a number of ‘disposals’ between 2013 and 2017, including the sale of Public Private Partnership (PPP) assets and a real estate business, to determine whether any of these acts caused material detriment to any of the pension schemes or were carried out to avoid scheme liabilities.

While substantial proceeds were received by the Group from these sales, the information we obtained demonstrated that these proceeds were used to provide essential liquidity for the Group. This enabled the Group to continue to support the schemes for a longer period by paying deficit repair contributions (DRCs) under their recovery plans. The continued payment of DRCs meant the schemes were not detrimentally affected as a result of these disposals.

Misleading information

Our assessment of the material obtained and shared by the other agencies indicated that Carillion PLC had published misleading information about its financial performance.  Therefore, we considered whether the publication of misleading financial information between July 2015 and July 2017, and the resultant payment of dividends during this period, caused material detriment to any of the schemes.

To pursue a material detriment Contribution Notice on that basis, we would need to be satisfied that the financial misstatements and the dividends consequently paid out “detrimentally affected in a material way the likelihood of accrued scheme benefits being received”[2]. We concluded that this was not the case for the following reasons:

  • The magnitude of the contract losses already amassed before and during 2016 was so great that the Group was arguably facing inevitable insolvency by the end of the year. If the Carillion board had withheld the 2015 and 2016 dividends, it does not automatically follow that there would have been additional payments to the schemes at that time, given the level of the Group’s bank debt and other creditors.
  • Carillion PLC was ultimately brought down by the unsustainable level of its debt. The final accounts published before insolvency (the interim 2017 Group accounts) listed trade creditors of approximately £2 billion, and bank debt of just below £1 billion. If the 2015 and 2016 dividends had not been paid, it is reasonable to assume that the directors’ priority, acting reasonably, would have been to use the cash to pay down debt rather than to increase payments to the schemes, given the more immediate risk the debt presented to the future of the Group.
  • Based on the assumed financial strength of the Group prior to the July 2017 profit warning, the schemes had acceptable recovery plans in place and scheduled DRCs were paid up until three months before the Group’s liquidation. To the extent that Carillion PLC continued trading while the directors knew of its true financially distressed state, funded by increased debt and by stretching trade creditors, the continued payment of DRCs, as mentioned above, meant that the schemes were not detrimentally affected during that period.
  • Additionally, had the true position of Carillion PLC’s financial position been revealed earlier, the collapse of the Group would most likely have happened sooner, with no consequential improvement for the likelihood of member benefits being paid. In that scenario, the schemes would not have received the contributions that they did in 2016 (£47 million) and 2017 (£29 million).

Investigation conclusion

In the circumstances, there was no prospect of securing a Contribution Notice based on the evidence of Carillion PLC’s public misstatement of its financial performance. We did not find any evidence that this, or any of the Group disposals, caused material detriment to the likelihood of any of the scheme’s members receiving benefits, or were undertaken with the main purpose of avoiding the debts owed to any of the schemes.

We also concluded that there was no scope to issue a Financial Support Direction as, given the insolvency of the whole Carillion Group, there would be no targets capable of providing financial support to the schemes.

Finally, we considered whether there was any scope to use our criminal power relating to the provision of false and/ or misleading information[3]. However, we concluded that the offence was not made out on the facts of this case.

Footnotes for this section

  • [2] Pensions Act 2004 section 38A.
  • [3] s.80 Pensions Act 2004.


The Carillion Group’s insolvency has had a significant impact on its pension schemes and the benefits savers will receive. Following an extensive investigation exploring all the avenues available to us to take action, including consideration of the material shared by the other investigating agencies, we have concluded that we are not able to use our powers in these circumstances. However, we are supportive of the action taken by the other agencies against the parties involved where alleged failings have been identified and will assist in any action that improves the position of the pension savers and the PPF.

As well as considering whether the use of our powers would be appropriate, we undertook an assessment of contagion risk (through the supply chain and employers with similar business models) and the likely impact this would have on their pension provision. As we stated in our Annual Report and Accounts 2018 to 2019, this assessment did not find systemic risks to other defined benefit schemes as a result of Carillion’s collapse.