Carillion: High debt, mismanagement and increased political risk
The UK-based construction and services firm Carillion went into liquidation in January 2018, with debts of over £1 billion, just £29 million cash in the bank, and a pension deficit of over £500 million. It caused a scandal that was political as well as commercial. Public inquiries and a review of UK-based auditors have been direct consequences. Causes of the collapse were high debt levels, a complex company structure and low margins on large public sector contracts. The Board did not respond to the overt warnings of a major shareholder three years earlier. Just 10 months before, the annual report had given an upbeat report on the company’s position and prospects. The case study focuses on four dimensions: Strategic management – Carillion’s strategy of growth through acquisitions funded by borrowing, was high-risk. Corporate governance – The board did not challenge executives over risk or debt. Financial accounts – Aggressive accounting hid liabilities, that were missed by auditors; complacent assumptions around the valuation of goodwill were evident. Political risk – The scandal shook the assumption that private sector management was inherently superior, and nationalization gained public support in the UK.
- The case study provides a rare opportunity to explore the dynamics of a board that failed to identify strategic risks, and who missed warning signs, both oblique and explicit.
- There are also learning opportunities around the valuation of goodwill, and auditing of complex accounts. Much detail is in the public domain, following a major Parliamentary inquiry.
Carillion, Construction and Engineering, Services, Facilities Services
20 years, but with a particular focus on later period 2015-2018
Cranfield University
Wharley End Beds MK43 0JR, UK
Tel +44 (0)1234 750903
Email [email protected]
Harvard Business School Publishing
60 Harvard Way, Boston MA 02163, USA
Tel (800) 545-7685 Tel (617)-783-7600
Fax (617) 783-7666
Email [email protected]
NUCB Business School
1-3-1 Nishiki Naka
Nagoya Aichi, Japan 460-0003
Tel +81 52 20 38 111
Email [email protected]
IMD retains all proprietary interests in its case studies and notes. Without prior written permission, IMD cases and notes may not be reproduced, used, translated, included in books or other publications, distributed in any form or by any means, stored in a database or in other retrieval systems. For additional copyright information related to case studies, please contact Case Services.
Research Information & Knowledge Hub for additional information on IMD publications
Kevin Warsh focused his first conference as Federal Reserve chair on June 17 on a familiar problem: fast-rising prices fuelled by the Iran war. Yet another challenge facing central banks goes beyond the immediate inflation shock. As investors plac...
Every executive eventually hits a moment of truth. A new project, a bold expansion, a promising acquisition, and suddenly the hard questions are right in front of you: Will this venture be profitable? Will it generate cash flow? How much capital w...
Switzerland has reached an uncomfortable conclusion: that UBS has become too large for the state to comfortably stand behind. The government’s plan to force the bank to hold roughly $20 billion more in capital is an attempt to close that gap, even...
Investor climate initiatives are facing unprecedented scrutiny at a time when the policy landscape is shifting rapidly, and the effectiveness of current investor actions is being actively questioned. Against this backdrop, this project reexamines ...
For much of the past decade, investor climate action has rested on a simple idea : if investors demand the right disclosures, set the right targets, allocate capital differently and engage hard enough with companies, markets can deliver economy-wi...
in I by IMD
Research Information & Knowledge Hub for additional information on IMD publications
Research Information & Knowledge Hub for additional information on IMD publications
Research Information & Knowledge Hub for additional information on IMD publications
Research Information & Knowledge Hub for additional information on IMD publications
Research Information & Knowledge Hub for additional information on IMD publications
Research Information & Knowledge Hub for additional information on IMD publications
London School of Economics research project report, May 2026
Research Information & Knowledge Hub for additional information on IMD publications
Research Information & Knowledge Hub for additional information on IMD publications
in I by IMD
Research Information & Knowledge Hub for additional information on IMD publications
IMD White Paper, 6 May 2026
Research Information & Knowledge Hub for additional information on IMD publications