Interserve awarded ‘£660m of public contracts’ in months before collapse

Interserve was handed £660 million worth of public contracts in the months before facing collapse, the GMB Union has claimed.

The construction group was forced through a pre-pack administration at the weekend after its largest shareholder, the US hedge fund Coltrane, opposed restructuring plans.

Interserve awarded ‘£660m of public contracts’ in months before collapse

Administrators EY immediately sold the business to a new company to be controlled by Interserve’s lenders.

According to the Tussell, a data provider on UK government contracts, Interserve was handed public contracts worth £432m in 2017, and £233m last year.

The biggest contract in 2018 a £66m deal for total facilities management services awarded by the Foreign and Commonwealth Office in July.

Its Scottish projects include the £22m redevelopment of the Scottish National Gallery in Edinburgh, upgrading the A737 in North Ayrshire and a £2m facilities services contract at Edinburgh Zoo.

Interserve gave out profit warnings in May 2016, October 2017 and November 2018.

In December 2018, with debts approaching £700m, the company announced a debt for equity rescue deal.

Since then, Interserve has been awarded £6m in public contracts, taking the total amount held by the firm to £2.1 billion.

GMB, the union for Interserve workers, said “the collapse shows a government hell-bent on privatisation had learnt nothing from the Carillion fiasco”.

Carillion went bust last year with massive debts. The collapse cost thousands and jobs and tens of millions of taxpayer pounds.

The union has launched its Go Public campaign which, calling for an end to outsourcing and privatisation in UK public services and for a better deal to the taxpayer.

Rehana Azam, GMB national secretary, said: “Awarding hundreds of millions in taxpayer funded contracts to troubled outsourcing companies is the height irresponsibility.

“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.

“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.

“GMB calls time on the outsourcing of public services - it’s a bad deal for the public and a bad deal for the workers.”

The National Federation of Builders (NFB) said the scenario highlights the need for urgent procurement reform.

The construction body said it will be doing all it can to support members who are part of Interserve’s supply chain, as well as the many workers and apprentices affected.

Richard Beresford, chief executive of the NFB, said: “This decision on Interserve’s future shows why we need to reform the procurement process from its foundations to ensure that more regional contractors can compete and win work, the damaging trend to work within wafer thin profit margins does not continue, and spread risk across fiscally responsible businesses who reinvest profits and are not bound by shareholders.”

Neil Walters, national chair of the NFB, said: “When will clients see the advantage of using financially sound SMEs, who are in control of their business and win work on reputation?

“Tier 1 contractors must reform to demonstrate value for money, an appropriate financial model and respect for their suppliers, staff, and the long term victims of their decisions. Otherwise this cycle of failure will keep hurting our industry, costing taxpayers’ money and good people their jobs and businesses.” 

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