Today a £14 million fine imposed on Deloitte & Touche for their advice to the MG Rover Group and the “Phoenix Four” directors has raised questions over compensation for the workers and community hit by the carmaker’s collapse in 2005.
After losing an appeal that the accountants failed to manage conflicts of interest in their advice to the Phoenix Four, the Financial Reporting Council (FRC) today announced that Deloitte have been given a severe reprimand and a fine of £14 million – a record for the FRC. Mr Einollahi, the partner involved, has also been fined £250,000 and excluded from the profession for 3 years.
By enforcing these tough sanctions, the FRC have signalled that they will take strong action against those that they judge are not acting in the public interest or adhering to strict standards. It is clear they believe Deloitte & Touche – and Mr Einollahi – fell far short of the standards expected in their advice to the Phoenix Four.
But as we watch another twist to the MG Rover drama unfold, it’s important to remember what was important then – and what is important now. That is the 6000+ MGR workers who lost their jobs in the collapse, and the communities whose identity “the Austin” factory defined for over a century. Although this fine will certainly hold Deloitte accountable for their actions, unfortunately it will not change what happened to the employees, and the local area, in the demise of MGR.
This fine aims to punish Deloitte for failing to act in the public interest. I think that means doing the right thing by the people who lost most – the employees at Longbridge. Some of the proceeds of the £14 million fine should therefore go to them. After the collapse in 2005, the Phoenix Four made a promise to set up a trust fund for the MG Rover workers. But after seven and a half years of waiting, the money – initially anticipated to be in the millions – from the directors never appeared, and the trustees had to wind up the fund in 2012.
The unprecedented scale of this fine raises the question of compensation for the workers – who did everything that was asked of them by the Phoenix Four. Indeed, the five years they bought for MG Rover were crucial in allowing the West Midlands economy to modernise and diversify away from it’s huge dependence on Rover. As a result, when the collapse came the job loss in the region was significantly less than it would have been five years before.
It is not stretching a point to say that thousands of people in the Midlands kept their jobs because of the efforts of those at Longbridge. But when the collapse finally came, MG Rover workers themselves lost everything and the wider community around Longbridge was hit hard. The area around Longbridge is now climbing back, but unemployment in this area is still well above the national average, and the amount of people out of a job long-term continues to rise.
There are thousands of people affected and many issues that need addressing in the area, so the money wouldn’t be enough to change lives. But it would help the community draw a line under the MG Rover saga and move into the future.
The £14 million must not only deter accountants from acting in this way again. It must mean change for the people, and the community, who suffered so much from the collapse of MGR and are still yet to be repaid.
