GMB, the union for staff employed by outsourcing contractors, has called on the government to intervene over the deal that troubled construction and FM giant, Interserve, has reached with its creditors.
Interserve has a market value of £17m, down from £500m in 2017. The debt for equity deal announced on Wednesday will see Interserve Group’s debts cut from over £600m to around £275m through the issue of £480m new shares.
However, GMB fears that the jobs of the 45,000 Interserve employees and thousands of others in the supply chain remain under threat. It wants the government to step in to safeguard jobs and the interests of the taxpayer.
"It appears that under the plans to covert debt to equity, Interserve will continue to make losses for the next seven years at least. GMB is concerned that in order to pursue this strategy, Interserve will seek to attack pay, pensions and other terms and conditions of employment,” says Paul Maloney, Regional Secretary for GMB Southern.
"GMB understands that the Cabinet Office had concerns about the rescue deal. GMB fears that rather than resolve the issues surrounding Interserve, this deal may simply delay inevitable demise.”
The Interserve deal has hit a further problem, as the financial media in both the UK and the USA are reporting that New York-based hedge fund, Coltrane, is opposing the deal. Interserve has confirmed that Coltrane has requisitioned a General Meeting and is calling for the removal of the current Board, with the exception of CEO, Debbie White. The Financial Times reports that Coltrane, which it says has voting rights accounting for around 27% of the shares, would see its equity almost wiped out by the deal and is seeking support for its proposals from other shareholders. (Read the FT report here.)
Debbie White describes the successful implementation of this plan as “critical” to the group’s future. “The Board believes that this agreement will secure a strong future for Interserve,” she says. “This proposal has been achieved following a long period of intensive negotiation and has the support of our financial stakeholders and Government.”
The problems at Interserve are the latest in a growing list of problems with outsourced contracts, the pinnacle of which to-date is the collapse of Carillion in January 2018. In the November/December 2017 issue of HEFMA Pulse magazine, Executive Editor, Jane Renton warned of an impending crisis in the sector in an interview with Business Consultant, Julian Fris. Jane reported that with recent tender bids for NHS contracts being based on margins of around 2% or even lower, the number of firms bidding for these contracts was gradually reducing, leaving the NHS at the mercy of a small handful of much larger companies whose size means they are willing to pursue volume over value. (This interview may be over a year old but it is still very pertinent to today’s market. Read it here.)
Paul Maloney echoes this theme in a call for change. "The carnage surrounding the sector, with companies underbidding for contracts is a race to the bottom which will see a serious decline in public services. The rot must stop - GMB calls upon the Government, NHS Trusts, Local Authorities and Schools to end the menace of outsourcing, bring contracts back in house, and use the savings to improve public services for all, rather than provide profits and bonuses for the tiny minority of executives and shareholders.”
