In March 2026 the Financial Conduct Authority imposed a £12.99 million penalty on John Wood Group PLC following an investigation into failures in its financial reporting and governance. The regulator concluded that the company had allowed misleading financial information to reach the market and had failed to maintain adequate systems and controls over financial reporting.
While the facts of the fine were misleading information, the underlying cause was a messy compliance system where internal reporting had become a negotiation as opposed to an objective process. Commercial pressure combined with weak internal challenge allowed misconduct to snowball into a serious fine. With the Crime and Policing Bill on the horizon, such failures could soon result in corporate criminal penalties.
A compliance culture under pressure
Wood Group is a major international consulting and engineering company headquartered in Aberdeen and operating in more than sixty countries. It is UK listed and has a global workforce of tens of thousands. One would imagine such a large company would take internal compliance seriously.
The FCA’s investigation focused on the period between January 2023 and November 2024. During this time the company was struggling with losses from complex fixed-price engineering contracts. Management had publicly announced that it was exiting large lump-sum projects because of the risks they carried. Internally, however, those same projects continued to dominate financial reporting.
The regulator found that Wood Group developed what it described as a “poor financial culture”. Staff within the Projects Business Unit felt strong pressure to maintain financial performance in line with market expectations. In that environment, accounting judgements remained overly optimistic while internal controls failed to mount an effective challenge.
This pressure was compounded by a structural weakness in governance. Accounting decisions within complex engineering contracts often require subjective judgement. The company’s systems and oversight processes were supposed to ensure those judgements were evidence-based and compliant with accounting standards. Instead, the control framework allowed unsupported assumptions to persist.
Project A: The loss that never appeared
One of the most striking examples involved a series of engineering contracts known as Project A. The contracts had been agreed several years earlier with a total value of more than $700 million.
By the end of 2022 it had already become clear internally that the project was loss-making and that future remediation work would require substantial expenditure. Internal estimates suggested around $18 million of future costs at the time.
Under accounting standards such as IAS 37, a loss-making contract must be treated as an onerous contract and the expected loss must be recognised in the financial statements. Wood Group did not do so.
Instead of recognising the expected costs, the company continued to treat the project’s ongoing expenses as costs that would simply be recognised as they occurred. Over time the scale of the expected remediation costs increased dramatically, with internal estimates reaching more than $40 million. However the financial statements did not reflect this reality.
Compounding the problem, negotiations with the customer about a settlement were effectively paused until after the company had finalised its financial results. Some staff believed the delay was intended to prevent the settlement from affecting those results. Auditors were not informed about the negotiations while the financial statements were being prepared. By failing to recognise the expected losses when they became clear, Wood Group overstated its reported profits which is a serious compliance failing.
Project B: The numbers that did not add up
A second major issue involved another fixed-price engineering contract known as Project B. The project had already become loss-making during 2023, with an expected loss of around $9 million. Instead of allowing the loss to grow as the financial realities of the project worsened, management attempted to maintain the original loss estimate.
The methods used to achieve this reveal the depth of the governance problem. First, the company attempted to recognise $16 million in additional revenue through an internal accounting “dispensation”. This revenue was based on a proposed contractual change that had not been accepted by the customer and that internal teams believed was unlikely to be approved.
Second, management assumed that the project would achieve $22.9 million in cost savings. Those savings were not supported by detailed plans and were widely considered unrealistic by the team managing the contract.
Then, the company underestimated the likely future costs of the project by around $20 million by failing to account properly for performance issues that had emerged during the work.
When the dispensation was eventually withdrawn, the project’s losses became unavoidable. The financial impact was substantial. The regulator concluded that these accounting decisions alone overstated operating profit by more than $40 million.
Moving provisions to hide losses
The problems did not end with individual projects. At the end of the 2023 financial year Wood Group conducted a review of project provisions and contingencies across its Projects Business Unit. Instead of assessing the risks associated with each project individually, the review took place at an aggregate level.
Its objective was to release enough provisions to offset losses elsewhere in the business. This approach contradicted the company’s own accounting policies and the relevant accounting standards. Nevertheless, provisions totalling more than $43 million were released, artificially increasing reported profits. A large portion of these releases later proved unsupportable.
A breakdown in transparency with auditors
Perhaps the most serious governance failure emerged in 2024 when the company prepared its half-year financial results. By this stage internal discussions were underway about recognising more than $140 million in write-offs related to problematic engineering contracts. Yet these discussions were not disclosed to the audit committee or to the company’s auditors during key meetings.
Instead, the auditors were initially presented with a position that attempted to maintain the previous accounting treatment. The alternative scenario involving major write-offs was only disclosed later, leaving the auditors with insufficient time to review the changes before the results were published. The lies snowballed, and the company proceeded to publish the results anyway, despite the unresolved concerns.
Eventually an independent review was launched. Wood Group acknowledged material weaknesses in its financial culture and governance processes. The market reaction was swift. Between November 2024 and March 2025 the company’s share price fell by roughly 78 percent.
Why this matters for Provision 29 of the UK Corporate Governance Code
The Wood Group case reads like a case study for the importance of Provision 29 of the UK Corporate Governance Code. Provision 29 requires boards of listed companies to monitor and review the effectiveness of their risk management and internal control frameworks. Boards must also provide a declaration explaining how those systems have been reviewed and whether they are effective.
This requirement is intended to ensure that boards maintain visibility over the risks that could undermine financial reporting or corporate integrity. In the Wood Group case, the regulator effectively concluded that the company’s internal controls were unable to prevent or detect inappropriate accounting decisions. Senior management pressure combined with weak oversight created an environment where unsupported assumptions could influence financial reporting.
In practical terms, this is exactly the type of scenario Provision 29 is meant to prevent.
A board that has robust oversight of financial controls should be able to identify:
- unrealistic cost assumptions
- unsupported revenue recognition
- the movement of provisions to manage results
- delays in recognising losses
The failure to identify these patterns raises serious questions about whether the board’s review of internal controls was sufficiently rigorous. Going forward, firms must embed Provision 29 into their risk decision making and fully internalise what that means for projects across the business. In short, head-in-the-sand is not a viable compliance strategy.
The coming risk: corporate liability under the Crime and Policing Bill
Under the proposed Crime and Policing Bill, the UK is expanding corporate liability for all crimes. This builds upon ECCTA and the failure to prevent fraud offence which has been in force since September 2025, which means companies may be held criminally liable if employees commit fraud for the company’s benefit and the organisation failed to implement reasonable prevention procedures.
Although the Wood Group case was ultimately treated as a regulatory breach rather than criminal misconduct, the underlying behaviour touches on the type of conduct that could attract scrutiny under the new Crime and Policing Bill rules.
Wood Group could potentially be held criminally liable for:
- deliberate attempts to maintain financial performance despite known losses
- revenue recognition that lacked contractual basis
- optimistic accounting assumptions unsupported by evidence
- lack of transparency with auditors and governance bodies
If similar conduct were interpreted as fraudulent financial reporting under the future enforcement environment, prosecutors could argue that the company failed to prevent misconduct by its employees.
The key question would become whether the organisation had adequate procedures designed to prevent such financial misrepresentation. In that context, rules like Provision 29 become a significant bulwark for a company’s defence against criminal liability. Preventing fraudulent ideas and misleading information, even when grounded in otherwise legitimate business decisions, is not just vital from a regulatory perspective, but increasingly important to prevent criminal liability as well.
