Carillion 'shelled out' £6.4m to advisers day before it asked Government for £10m loan

Collapsed outsourcing firm Carillion “shelled out” £6.4m to advisers the day before it pleaded for an emergency £10m loan from the Government, it has been revealed today.

The huge handout – to private consultants and law firms – “lays bare the cynical leadership of the Carillion board”, said the head of the Commons business committee, which is investigating the debacle.

“Expensive advisers still pocketed millions while workers risked losing jobs and long-suffering suppliers faced financial ruin,” Rachel Reeves said.

Frank Field, chair of the Work and Pensions Committee, said Philip Green, Carillion’s chairman, had pleaded for the bailout “with the company teetering on the abyss”.

He added: “I am not surprised the Government took with a pinch of salt his assurances that all would be reimbursed once he had unscrambled the eggs.”

Earlier letters uncovered by the business and Work and Pensions committees, which are holding a joint inquiry, suggested £3.1m was paid out as the emergency loan was sought.

But new information received from the official receiver now shows that Carillion handed out more than twice that amount – a total of £6.4m.

The largest sum was paid to Ernst and Young, one of the “big four” accounting firms (£2.5m), with the other largest payments to Slaughter and May (£1.2m), FTI Consulting (£1m) and Lazard and Co (£0.5m).

The fees were paid on Friday 12 January as Mr Green and chief executive Keith Cochrane were trying to persuade ministers to prop up the stricken construction and services giant.

Their appeal for help was rejected over the weekend and Carillion called in liquidators the following Monday morning, with more than 1,450 workers losing their jobs.

The committees have published a “final request” letter, sent by Mr Green on 13 January, which said the loan would “be at extremely modest cost to HM Government”.

“It will not be a bailout, and there can be no basis for saying that Carillion – or its shareholders or management – is being rewarded for failure or for past mistakes,” the letter reads.

Mr Green said “the previous senior management team have all exited the business” and argued “the key beneficiaries of a restructuring will be our employees”.

Mr Field added: “The most troubling element of this letter is its demands for an immediate £10m from taxpayers, the very next day after Carillion shelled out £6.4m to its illustrious advisers, including the EY restructuring gravy train and half the law firms in the City of London.

“The smaller suppliers that are the lifeblood of the British economy of course got no such treatment.”

Carillion unravelled rapidly after a profit warning last July, when it said problem contracts would cost it £845m in writedowns.

A business review by FTI, published by the committee earlier, said the firm used “accounting treatments” to make its position appear rosier, rather than tackle underlying problems with its contracts and balance sheet.

Its collapse has triggered a furious political row into why the firm was handed new public contracts even after issuing multiple profit warnings.

Labour has unveiled tougher rules to strip outsourced contracts from “rogue suppliers”, making it easier to designate private firms with state contracts as “high risk” if they fail to deliver on a range of behaviour.