The rise of Carillion alongside the UK government’s promotion of private finance initiatives from the early 2000’s may have largely been heralded as a success until Carillion’s unprecedented demise early on this year.
As Rebecca Smithers reports in The Guardian, the repercussions of Carillion’s collapse are still being felt today, nearly a year after the fallout. According to Smithers, the knock-on implications of the crash include significant gaps in pension funds, taxpayers being left to front significant costs (to the tune of more than £150 million), and 780 firms falling into insolvency within 2018’s first quarter. The public impact of this private sector catastrophe is striking.
Furthermore, how a crash of this magnitude managed to occur despite costly monitoring by auditing firms such as Deloitte, has left the government calling for a review of the UK’s “big four” auditing firms, reports Smithers. Preliminary reports suggest that while Carillion was experiencing its down-spiral, Deloitte, who stood to earn some£10 million as Carillion’s internal auditor, failed to report on the firm’s serious failings. Whether or not this omission was purposeful and strategic, or whether it was an error of costly oversight, are questions left for the review. Either way, it may be that a change in the “Big Four’s” auditing practices and the government’s promotion of outsourcing and private finance initiatives may be in for a change in the near future.