8th Dec 2016 12:35
LONDON (Alliance News) - Outsourcer Serco Group PLC and security firm G4S PLC on Thursday both confirmed the UK Home Office has extended their asylum seeker contracts through to 2019.
Under the Compass contracts with the UK Home Office, Serco is responsible for accommodation, transport and related support services for asylum seekers in the north west of England and Scotland & Northern Ireland, being two of the six Compass regions.
Under G4S's Compass contract, it houses asylum seekers whilst their claims are being processed.
The contracts had been set to end next year, though there was an option to extend them until September 2019.
Serco took an onerous contract provision of GBP112.0 million within its results for 2014 for the Compass contracts, reflecting the estimate at that time of future operating losses on the contracts.
This charge included the expectation that the contracts would be extended, and "this assumption has now proved correct", Serco said, noting that in 2015 and the first half of 2016, utilisation of the provision was "broadly in line with our original expectations".
Serco said, based on its initial estimates, it is likely a normal year-end re-estimation of the costs may result in a reduction in the provision on the Compass contracts, though noted they will continue to be heavily loss-making.
"At this early stage, we estimate that the net reduction in future liabilities will be around GBP20.0 million," Serco said.
Earlier in the day, G4S had also confirmed its Compass contract was extended, pointing to a statement delivered by The Minister of State for Immigration Robert Goodwill in which this extension was announced.
In the statement delivered to the House of Commons on Thursday, Goodwill said he had "considered carefully whether to extend these contracts and weighed up a range of factors, including the value for money they offer the taxpayer and the improvements that have been made to the standard of accommodation when compared to those achieved under previous arrangements".
"I have decided to extend the contracts until 2019. However, I recognise that there are improvements that can be made. Therefore I have taken this opportunity to make changes and additional investment to address the concerns that have been raised and improve the services that are provided," Goodwill said.
These improvements were increasing the amount of money the Home Office pays for the provision of welfare officers and staff property management. Goodwill said he has also agreed that the governmental department should work with providers to develop new terms to ensure there is "sufficient initial accommodation available and thereby further reduce the need to use contingency arrangements, such as hotels, in the future".
The minister noted he has also introduced a higher price band for any increases in the number of asylum seekers requiring accommodation, which he said "will allow the providers to further increase their property portfolios if required and widen the areas in which they operate".
G4S said it expects its loss-marking UK Compass asylum seeker contract to be delivered broadly in line with the onerous contract provision already established in its balance sheet.
The group on Thursday said it has continued to work with the Home Office to improve service delivery and efficiency and to support a sustainable contract extension.
Earlier this year in March, G4S had said the onerous contract provision was GBP31.0 million covering the period running to August, though said should this be extended to August 2019, a further provision for GBP57.0 million would be required.
Shares in G4S were down 0.2% at 223.70 pence on Thursday, whilst shares in Serco were up 2.8% at 141.20p.
By Hannah Boland; [email protected]; @Hannaheboland
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