22nd Nov 2013 12:29
LONDON (Alliance News) - Serco Group PLC suffered another blow Friday after the UK government decided not to proceed with a contract to privatise the running of three prisons in South Yorkshire, a deal that the outsourcing company had been the sole bidder on.
In a statement, the company said that the Ministry of Justice has decided to keep the prisons - Moorland, Hatfiled and Linholme - under public sector management for the time being because urgent changes are needed at the prisons and transfer to private sector control would delay them.
"From meetings with the UK Government it is clear that the operational needs of the prisons will be best served by the necessary changes being implemented without further delay," acting Chief Executive Ed Casey said in a statement.
Serco had warned in August that a decision on the South Yorkshire prisons contract would be delayed and would depend on the ongoing review of Serco's other contracts with the Ministry of Justice.
Serco was placed under investigation by the UK government in July when all the criminal tagging contracts held by the firm and G4S PLC were placed under review after details from an audit emerged, showing that they had been over-charging, claiming for people who were dead, who had never been to prison, or never tagged in the first place. Earlier this month, the Serious Fraud Office opened a criminal investigation into the contracts.
Additionally, the government in August then called in police to examine claims of fraudulent misreporting of data on Serco's contract to transport prisoners to court in London and East Anglia.
Serco last week warned that the UK government issues and the impact of slower US government spending had put the firm under financial pressure ans caused other contract to be delayed or lost. The company cut its full-year profit expectations and warned that profits in 2014 are set to be even lower.
Thursday, the company's head of UK and European operations, Jeremy Stafford, departed in the wake of the crisis, following former group Chief Executive Christopher Hyman out of the door.
The company is trying to restore relations with the UK government, one of its biggest customers. It has pledged to clean up its act, replace its management, split its UK operations out into a separate unit with more oversight, retrain staff, and improve its ethical procedures. However, it has been told it won't be awarded any further government contracts until the current review is completed.
Serco shares were up 0.6% at 441.20 pence Friday morning.
By Steve McGrath; [email protected]; @SteveMcGrath1
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