The total value of public service contracts held by Interserve has reached £2.1bn © Chris Ratcliffe/Bloomberg via Getty Images
The total value of public service contracts held by Interserve has reached £2.1bn © Chris Ratcliffe/Bloomberg via Getty Images

Interserve won £660m public contracts despite profit warnings

19 March 2019

The government awarded £660m worth of contracts to Interserve after the firm issued three profit warnings, according to the GMB.

Public service contracts worth £432m were awarded to Interserve in 2017, with a further £233m awarded last year, according to the GMB and data provider Tussell.  

In the two-year period, the largest contract worth £67m was awarded to Interserve by the Foreign and Commonwealth Office in August 2018 to provide total facilities management at its main building in London as well as several embassies throughout Europe. 

Interserve issued profit warnings in May 2016, October 2017 and November 2018 before announcing a debt-for-equity rescue plan in December as its debts approached £700m.

Following the announcement, the firm was issued a further £6m worth of contracts, bringing the total value of public service contracts held by Interserve to £2.1bn.

Rehana Azam, GMB national secretary, criticised the government’s continued outsourcing of public services to troubled companies, branding it “the height of irresponsibility.”

She said: “This government’s obsession with outsourcing has now put another 45,000 jobs at risk, along with thousands more in the supply chain. Ministers have still not taken on board the lessons from the collapse of Carillion.

“The outsourcing sector is descending into chaos as companies underbid each other for contracts in a race to the bottom which will see a serious decline in public services.”

A Cabinet Office spokesperson said: “Our priority is to deliver quality public services while ensuring value for money for taxpayers. The awarding of contracts follows a robust process, including financial checks, and we are reforming our approach to outsourcing, so that services are set up to succeed. The refinancing process that Interserve executed led to the smooth continuation of public services and safeguarded thousands of jobs.”

The firm, which employs up to 45,000 people in the UK, filed for a “pre-pack” administration deal last week having failed to gain shareholder backing for its rescue deal.

Following the announcement, the government insisted that the deal would not have an impact on jobs or the provision of public services currently being delivered by Interserve.

Last week, it was announced that Welsh construction company Dawnus had gone into administration with a number of live public sector projects underway in Wales including schools and flood defence schemes.

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