Government failed to retrieve more than £360m from Carillion, reports say

Accounting firm EY provided proposals where the profitable parts of the company would be sold

Carillion was one of the Government's most important contractors (Getty)

The Government failed to retrieve more than £360m from Carillion, ignoring advice from accountants.

Accounting firm EY provided proposals where the profitable parts of the company would be sold while the rest would be placed into liquidation.

Estimates from EY suggested this would generate £364m, the majority of which would have been injected into Carillion’s pension schemes.

The Cabinet Office, which is responsible for government contractors, apparently did not pressure Carillion’s directors to accept EY’s proposals, multiple sources told The Guardian.

They apparently rejected the plans as they believed they could turn the company around.

Two potential scenarios were offered by EY, the break-up plan which would have raised £364m and an involuntary insolvency which would leave little money left over.

“I think they [the Government] thought that if they could get to the end of January, they could find new finance and the company would survive, maybe in a different structure,” an unnamed source told the Guardian.

“I don’t think they thought it would go bang.”

Carillion was one of the Government's most important contractors before it collapsed into administration.

Following several days of tense negotiations, the board of construction giant Carillion said that it had “no choice but to take steps to enter into compulsory liquidation with immediate effect’’.

The collapse raised fears about the future of hundreds of major projects at an already challenging time for the British economy.