KPMG chief bans firm from 'Carillion profiteering' amid backlash

5 February 2018, 15:10

Bosses at KPMG, the 'big four‎' auditor under fire for signing off Carillion's accounts months before its collapse, have banned colleagues from taking on new work relating to the liquidation of the construction giant.

Sky News has learnt that David Matthews, KPMG's head of quality and risk, told partners several days ago that they could not accept any Carillion-related instructions from any public sector organisations.

Mr Matthews also warned colleagues that any private sector work for clients ‎involved in the fallout from Carillion's demise would have to be signed off by its UK board.

:: Another 452 jobs to go after Carillion collapse

The edict from Mr Matthews underlined the acute sensitivity of the crisis for the auditor's reputation, and comes as it faces inquiries by the accounting watchdog and parliament.

KPMG has endured a torrid few months in the UK and overseas, after being caught up in a corruption scandal in South Africa relating to the powerful Gupta family.

Last month, the firm saw its contract with the Grenfell Tower inquiry cancelled amid concerns over potential conflicts of interest.

Mr Matthews' instruction to KPMG partners over Carillion reflects the intense scrutiny now facing professional advisers who traditionally enjoyed relative anonymity.

It means that the firm will undertake no work for central or local government, or other public bodies, amid a scramble to avoid widespread disruption to the public services and infrastructure projects being worked on by Carillion before it fell into liquidation.

City sources said that KPMG could also forfeit millions of pounds in fees from work for private sector clients wanting, for example, to acquire divisions of Carillion.

In a ‎statement issued to Sky News, a KPMG spokesman said: "KPMG has decided that we will not currently accept any engagements for central or local government or any public bodies in relation to Carillion and this has been communicated to our partner group.

"More generally, we have well-defined processes for both client and engagement acceptance (and continuance) which take into account a variety of factors and incorporate requirements for approval by appropriate levels of business leadership."

The auditor's new policy came as MPs on two Commons select committees prepare to interrogate the construction firm's former bosses on Tuesday.

The session is ‎likely to be the most explosive business-related evidence session since Sir Philip Green, the former owner of BHS, appeared in front of the same committees in June 2016.

KPMG - along with Deloitte, EY and PricewaterhouseCoopers - was ordered by the Business and Work and Pensions committees to disclose details of all work undertaken for Carillion over the last decade.

The HS2 contractor's auditor since its creation in 1999 was asked to explain why its opinion on the contracts which triggered an £845m writedown last July had changed from the position several months earlier.

Bill Michael, KPMG's UK chairman, was also challenged to explain why his firm had allowed Carillion to rely on £1.57bn of goodwill - an intangible asset - to strengthen its balance sheet.

Carillion held more than 450 government contracts when it collapsed with total financial obligations of about £5bn - including a Section 75 pension deficit of £2.6bn.

Sky News has also learnt that the select committee inquiry is expected to publish within days a lengthy document from‎ Gazelle Corporate Finance, which advised the company's pension fund trustees.

A source said the Gazelle report was "damning" of Carillion's efforts to avoid making larger pension scheme contributions and of trustees' and regulators' efforts to force the company to do so.

On Monday, more than 450 Carillion workers were made redundant, taking the total so far to over 800.

The company's collapse has sparked frantic efforts from ministers to corral small business lenders to support Carillion's supply chain amid an increasingly hostile political blame game.