Economy and Infrastructure

19.03.19

Interserve handed ‘irresponsible’ public sector contracts worth over £660m prior to administration

Interserve handed out £660m worth of public sector contracts before it went into administration last week – which one union has called the “height of irresponsibility.”

Interserve, which entered administration on Friday, has been awarded government contracts worth £665m since 2017 despite several profit warnings, according to analysis from the GMB union.

The troubled company still reportedly holds £2.1bn of public contracts and insists that its services will be still be delivered as normal following its administration.

This is despite profit warnings in May 2016, October 2017, and November 2018, and the GMB union said that awarding hundreds of millions in taxpayer-funded contracts to troubled outsourcing companies is the “height of irresponsibility.”

Rehana Azam, the GMB’s general secretary, said: “Interserve was clearly in trouble, and yet ministers saw fit to hand it hundreds of millions of pounds of public money. What on earth were they thinking?

“This government’s obsession with outsourcing has now put another 45,000 jobs at risk, along with thousands more in the supply chain.”

She said government ministers had failed to take 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,” Azam noted.

Interserve, which has over 45,000 UK staff, made the announcement that its parent company had applied for administration on Friday after investors rejected a debt-for-equity rescue deal.

The rescue deal would have handed ownership of the company over to lenders with shareholders left with just a 5% stake, but Interserve’s largest shareholder Coltrane led a rebellion against the deal.

Image credit - Steve Parsons/PA Archive/PA Images

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