Urgent question as Interserve goes into administration

18 March 2019

Shadow Cabinet Office Minister, Christian Matheson, asked the Government to make a statement on one of its contractors going into administration.

Interserve, one of the UK's biggest government contractors, announced that they were going into administration on Friday and control has passed to a new company. Interserve provides a range of services including construction, security, cleaning and catering.

The Parliamentary Secretary for the Cabinet Office, Oliver Dowden, responded to the urgent question on behalf of the Government and stated:

"...the Government are not responsible for decisions taken by companies in the private sector. What the Government are responsible for is the continued delivery of public services, and I assure the House that has happened in this case. Schools continue to be cleaned, roads continue to be repaired and improved, and services in Government buildings continue to run as normal.

I reassure hon. Members that nothing in Interserve’s refinancing will affect the delivery of public services. No staff have lost jobs and no pensions have been affected. The company has executed a contingency plan that it had prudently developed in case shareholders rejected the proposed refinancing deal. This was a pre-agreed transaction, known as a “pre-pack” administration. Hundreds of pre-pack administrations are performed every year, including by well-known companies. It is a well-established and normal process, typically used when a shareholder is blocking a business’s restructuring."

Christian Matheson replied to the Under-Secretary and said:

"The slow-motion car crash that is the Interserve crisis seems finally to have come to a dreadful conclusion. Let us first remember the company’s 45,000 employees and hundreds of small subcontractors living with uncertainty today. In June 2018 the Cabinet Office gave Interserve a red rating, which indicates:

“Significant material concerns for Cabinet Office Commercial Relationships Board to consider High Risk designation.”

That followed profit warnings issued over the previous year. Despite this, Interserve continued to receive public sector contracts worth hundreds of millions of pounds, including from central Government—a situation remarkably similar to the problems with Carillion just over a year ago. According to the GMB union, the largest of those contracts is worth £66.7 million and was awarded by the Foreign and Commonwealth Office in August.

What checks did the Government make to ensure the contracts they were signing were being given to a company capable of delivering them? Can the Minister also confirm reports that his Department drew up secret plans to nationalise some of these contracts—in other words, to take them back in-house—should Interserve fail? Incidentally, we would support such plans in principle. If such plans were drawn up, why did contracts continue to be awarded to a company that Ministers knew was struggling and was possibly unable to fulfil them?"

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