Public sector outsourcing firm Interserve on government watch after Carillion collapse

Written by Richard Johnstone on 17 January 2018 in News
News

Cabinet Office has reportedly been monitoring the firm since last September amid fears for future

Interserve has taken on the employment of 20,000 government workers through outsourcing deals. Credit: PA

A Cabinet Office team is monitoring the financial health of services firm Interserve amid concerns it could collapse like fellow outsourcing giant Carillion.

According to the Financial Times, government has been monitoring the firm, which provides services including estate and facilities management for government departments, since it issued a profit warning last September.

The firm, which said it has taken over the employment of some 20,000 government workers as part of outsourcing deals, said that it was implementing a transformation plan for the business that was expected to deliver £40m-£50m benefit by 2020.


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"We are keeping the Cabinet Office closely appraised of our progress as would be expected," it added.

In a statement, the Cabinet Office said: "We monitor the financial health of all of our strategic suppliers, including Interserve.

"We are in regular discussions with all these companies regarding their financial position. We do not believe that any of our strategic suppliers are in a comparable position to Carillion."

Carillion collapsed on Monday after months of speculation that it was unable to service its debts. The Cabinet Office has announced plans to ensure that the public services operated by the firm are maintained. However, the department’s permanent secretary John Manzoni told MPs on Monday that Whitehall’s crown commercial representative for Carillion was “rotated off” the now-collapsed government contractor last summer despite its profit warnings.

The concerns about outsourcing come as the Institute for Government concluded that Whitehall needs more civil servants with commercial skills. In a report looking at the use of private finance to deliver infrastructure, the think tank said that recent improvements in government have led to better private finance deals, such as for the Thames Tideway Tunnel sewerage scheme, but current civil service capability is not sufficient to meet the government’s objectives for substantially increasing private investment in infrastructure.

Nick Davies, the IfG’s associate director and report author noted that successive governments have struggled to agree and manage private finance contracts that provide good for value for money for taxpayers and consumers.

“If the government is to meet its objective of securing more private investment in infrastructure at a good price, it must address investors’ concerns about the upcoming pipeline,” he added. “The chancellor promised to publish a clear plan a year ago and his failure to do so has damaged investor confidence. The Infrastructure and Projects Authority must also further develop the civil service’s in-house commercial skills if they are to be successful in realising the government’s ambitious objectives for UK infrastructure.”

About the author

Richard Johnstone is CSW's deputy and online editor and tweets as @CSW_DepEd

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