The joint work and pensions and business, energy and industrial strategy committee heard from Emma Mercer, who had previously worked in Carillion’s UK finance function before spending four years with its Canadian business.

When Mercer returned in April 2017, being named as the new CFO later that summer, she said she found changes in the approach to assessing risk around contracts, compared to the approach before she left.

‘While I did not necessarily disagree with individual contract position, the overall tone was more aggressive. On my return, I saw the number of contracts where we were taking judgments and the size of those judgments were increasing. When the deterioration in the business started, that already more aggressive position made it difficult to withstand,’ Mercer said.

Mercer’s predecessor as CFO, Zafar Khan, came under sustained questioning from MPs, one of whom accused him of ‘being asleep at the wheel’, an allegation he refuted. Interim CEO Keith Cochrane CA, who held group finance director roles at Weir Group, Scottish Power and StageCoach Group until 2009 and joined Carillion in July 2017 from Weir where he was chief executive, said that while he and the board were aware of deteriorating cashflow on a number of projects, especially from Q2 2017, they were ‘certainly not aware of the quantum’, with Carillion subsequently issuing a surprise £845m profit warning in July 2017.

The former Carillion executive team told MPs that part of the issue was its difficulty in collecting receivables from markets which it was exiting, notably Canada and the Middle East. Cochrane, who had held a non-executive director role prior to taking on the CEO post said that in May 2017 the company’s auditor, KPMG, flagged an internal reporting issue where it looked as if Carillion was netting of both receivables and payables, rather than reporting gross values, but concluded this was a ‘presentational issue’, and that the figures in the annual report were in compliance with accounting standards.

Asked why the cashflow situation had deteriorated so quickly, Kahn told MPs that in 2017 a number of large construction contracts were moving toward completion, and while the working assumption was there were others in the pipeline to replace volumes, this did not happen.

Work and pension committee chair Frank Field asked if this was because Carillion’s accounting approach represented ‘a house of cards, with no real fall-back position so that if the company failed to get contracts, the whole thing fell down.’

In reply, Kahn said Carillion had been the preferred bidder on a number of contracts, but that these had ‘drifted’ as a result of Brexit-related uncertainties amplified by the general election announcement.

MPs expressed considerable surprise when they were told that on one of Carillion’s contractors, in Qatar, the job had doubled in size with an estimated 2,500 design variations, but that the company had not been paid for 18 months before it collapsed. Carillion was owed £200m on its project in Qatar which was linked to World Cup 2022.

The joint committee has said it will be looking closely at pension scheme contributions at Carillion, pointing out that the scheme was in deficit, while the company paid out £78.9m in dividends.

Report by Pat Sweet