Labour want Interserve banned from public contract bidding as concerns mount

After shares in the outsourcing firm Interserve plummeted by 73%, a Labour shadow minister has called on the company to be prevented from bidding for public contracts until it can prove it is financially stable.

Rumours about the troubled firm continue to increase with bosses having to release a statement yesterday (9 December) that its lenders are engaged in constructive discussions regarding the “agreement and implementation of a deleveraging plan” which would deliver a strong balance sheet.

The fate of Interserve has been much discussed since the demise of Carillion at the start of the year with many theorising that they see the outsourcing company following the same path. But bosses say that the recovery plan, aimed at scaling back its debt pile, was likely to see a "substantial proportion" of its outstanding borrowing converted into equity, or shares in the company.

"The fundamentals of our business remain strong. The delveraging plan will give Interserve a strong long-term capital structure and provide a solid foundation on which to build the future success of the group."
Debbie White, Interserve CEO.

In a statement, chief executive Debbie White said: “We are making good progress on our deleveraging plan which we expect to announce early in 2019. Our lenders are supportive of the deleveraging plan which will underpin the long term future of Interserve. The fundamentals of our business remain strong. The deleveraging plan will give Interserve a strong long term capital structure and provide a solid foundation on which to build the future success of the group.”

The government has come out to say it is behind the recovery plan and as recently as last Monday, Interserve won a £25m Welsh public sector contract in the redevelopment of Prince Charles Hospital in Merthyr. It is also responsible for contracts like the Ministry of Defence's training base on Salisbury Plain, probation services and cleaning railway stations.

However, defiant statements like that over the weekend have not filled everyone with confidence over the fate of one of Britain's biggest private sector employer. 

Labour have reacted by saying the government needs to implement a temporary ban Interserve bidding for public contracts and has accused ministers of “dropping the ball” on outsourcing.

Jon Trickett, shadow minister for the cabinet office, said: “The government must take urgent steps to ensure all existing contracts with Interserve are reviewed and that they are prevented from bidding for public sector contracts until they have proved they are financially stable and there is no risk to the taxpayer.” The government has once again dropped the ball on outsourcing and it’s the public who will suffer. Less than two weeks ago, I asked the government what extraordinary steps they are taking to monitor the financial health of Interserve. They told me they “do not believe that any strategic supplier is in a similar situation to Carillion,” and in November Interserve continued to win public sector contracts worth millions, despite effectively being insolvent.”

Commenting on the company’s future, a Cabinet Office spokesperson said: "We monitor the financial health of all of our strategic suppliers, including Interserve, and have regular discussions with the company's management. The company successfully raised new debt facilities earlier this year, and we fully support them in their long-term recovery plan."

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