Carillion collapse leaves auditors conflicted, V is for Victrex, not victory and British Land's UBS gamble

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Carillion collapsed into administration last month (Source: Getty)

Banking standards, BHS and now Carillion: it is to regulators’ discredit that MPs have repeatedly demonstrated their greater effectiveness at uncovering corporate behaviour – and proposing more powerful remedies.

So KPMG chiefs will be as anxious about appearing in front of two select committees in a fortnight as Carillion’s former bosses were earlier this week. Central to the questioning of Frank Field and his colleagues will, of course, be the quality and reasonableness of KPMG’s audit assumptions. But the wily Labour MP will surely press KPMG on another topical issue: whether breaking up the big four’s stranglehold on the audit market would remove the conflicts of interest plaguing the clean-up of collapses such as Carillion’s.

That question is already exercising minds inside the profession.

Read more: Carillion job loss total nears 1,000 after fresh round of redundancies

Rumours of a potential merger of Deloitte and Accenture, with the former’s audit business being spun off separately, have been swirling for months.

And I understand that FTI Consulting, which has no audit business, was rebuffed in an approach last year to acquire a chunk of PwC’s London-based restructuring practice.

Undeterred, FTI has now returned to poach Diederick van der Plas, the Big Four firm’s global head of business recovery services, and two of his fellow partners.

Last year’s defection of a KPMG team led by Richard Fleming to Alvarez & Marsal was another prime example of this trend among restructuring practitioners to remove themselves from the conflicts created by audit work.

My guess is it won’t now be long before this particular dam in professional services bursts.

V is for Victrex, not victory

BP, Barclays, Shire: all companies used to feeling the sharp end of shareholders’ ire at their annual meetings. But Victrex? I doubt many City A.M. readers have even heard of the listed polymer manufacturer.

Today’s AGM at JP Morgan’s Canary Wharf offices therefore promised to be something of a novelty, thanks to one man: Andrew Dougal.

The chairman of Carillion’s audit committee for the last six years, and occupant of the same crucial role at Victrex, had been due – until three days ago – to stand for re-election.

Nothing wrong with that, you might say: there’s no indication of anything being awry with Victrex’s numbers. There’s also something to be said for loyalty; a company insider said Dougal’s performance on the board justified his continued presence.

Read more: Victrex reports strong trading but warns of currency headwinds

Effective corporate governance, though, requires a healthy dollop of common sense. Victrex had been audited by KPMG – Carillion’s auditor – for 23 years, with the mandate due to switch this financial year. Logic dictates that that alone should have prompted its board to ask whether investor confidence would be shaken by such an unholy alliance.

The speed at which other Carillion bosses have bowed to the inevitable also suggests Victrex should have moved more quickly. Richard Howson, the former chief executive, stepped down from the board of Wood Group within days of the construction firm’s liquidation. Richard Adam, the ex-finance director, didn’t even wait that long, having quit his other board jobs last year.

In the end, a tally of proxy votes opposing Dougal led Victrex to bow to the inevitable, announcing on Tuesday that he wouldn’t, after all, stand for re-election. That deprives both the investors who turn up today the chance to participate in a row with the board, and Victrex’s directors of the credit for making an inevitable decision all by themselves.

British Land's UBS gamble

Remain voters hoping to find their scepticism about the City’s future reflected in trophy real estate deals will have been largely disappointed – so far.

Both the Cheesegrater, part-owned by British Land, and Walkie Talkie, backed by rival Land Securities, traded last year at premium valuations.

Read more: British Land's stock climbs on upbeat property leasing report

Now, a less eye-catching building – UBS’s London headquarters is also about to change hands, with Mubadala acquiring it for about £1bn.

Again, British Land is one of the beneficiaries, alongside Singapore’s GIC. I understand, though, that the existing shareholders will each retain five per cent of the asset, giving them another reason to hope that the Brexit effect on the City’s property market is not as dire as the doom-mongers predict.