Another outsourcing giant has gone bust, following in the footsteps of Carillion last year. Workers must not be made to pay for these failed Ponzi schemes. We must bring an end to the disaster of privatisation.
Interserve has been called the biggest company you have never heard of. In fact it employed 45,000 people in Britain alone, pocketing an annual worldwide revenue of £2.9 billion. 70% of this came from the public sector in the form of outsourcing contracts and projects.
But on Friday 15 March, Interserve went into administration after months of uncertainty. Is this Carillion mark two?
The GMB union has noted that just as Carillion scooped up a load of UK public sector cash just before going bust, so too has Interserve. It collected £432 million in new contracts in 2017 and £233 million more in 2018, mainly thanks to the Tory government. Yet it also issued profit warnings in 2016, 2017 and 2018, accumulating £700 million in debt by the end of last year.
As Nils Pratley in the Guardian (15 March) explained:
“…Interserve was infected with the industry-wide optimism that led boards to believe they lived in a low-risk world in which returns could be juiced up with debt. After the energy-from-waste disasters, Interserve was a company with operating profits of just £93m last year trying to support £815m of gross borrowings. Those numbers don’t work.”
Huge profits from the public sector (i.e. us) were not enough in the end to cover their gambles.
Concerns over Interserve had been circulating for months. Civil servants even drew up plans to nationalise the company should it have gone bust, rather than risk the fallout from another Carillion-style collapse where £150 million pounds of state money was lost, along with 1,700 jobs.
In fact, a final rescue plan was presented to the shareholders meeting on the 15th. But this was voted down by the main shareholders – two hedge fund companies.
One of these hedge funds, Coltrane, had been buying up Interserve shares as recently as February and had been manoeuvering to take total control of the company, ideally for a pittance. They opposed both the rescue plan and any attempt to carry out a ‘pre-pack’ plan, whereby the assets of the company were to be transferred to a new company, owned by those who were owed money by the original firm – in this case the banks and other hedge funds – prior to Interserve going into administration.
However, the pre-pack operation was carried out within hours of the vote, with the new firm Montana 1 established and duly renamed Interserve Group Ltd. All original shareholders – both the 16,000 small investors and the likes of Coltrane – have lost all the value of their shares, although Coltrane’s lawyers are still circling.
The war continues between those hedge funds who owned shares in the old company and those hedge funds who bought its debt (at a 50% discount) and are now shareholders in the new company.
Take back control
Workers have been told that everything will carry on as normal. But clearly concerns must be raised about the future. Other outsourcing firms such as Serco and Mitie are already looking to steal contracts from Interserve 2.0, which may well expose the brave predictions being touted by accountants about the new company.
One person who is not going to be left in the lurch is CEO Debbie White. She picked up a 125% bonus last year for all her sterling work and still expects to get a 50% bonus this year.
That our public services are once again at the mercy of privateers, scheming hedge funds and banksters will anger many. Profiteering at our expense has gone on long enough. The uncertainty which we will see in coming months is unacceptable.
We say: boot out the outsourcing con-merchants! Take all projects back under public control and ownership, with no compensation to these fat cats! End privatisation now!