Serco - too big to fail?

Stephen Struthers explores where Serco comes from, and explains why he's sick of it

Serco's history can be traced back to its origins as the UK subsidiary of the American RCA (Radio Corporation of America) in the cinema industry. Its current format is derived from a management buy-out in 1987. After initially expanding into defence work and space, it now reaches into transport, IT and business outsourcing, central and local government functions, health, education, welfare to work and to the private sector.

The company reports that it has more than 100,000 employees working in over 30 countries, with 60% of its business UK based. In 2012 alone, Serco’s revenue from the UK public sector amounted to £1.8 billion, two thirds of all its UK business. 

It has, by a considerable margin, the largest income from the UK public sector of the 'Big 4' outsourcing companies. Within central government, approximately half its income is from the Ministry of Defence where it holds contracts for over £600 million; in addition, contracts amounting to over £200 million each are held with the Ministry of Justice, Department of Transport and the NHS.

The National Audit Office has suggested that, given the sheer volume of business carried out, contractors and government are so mutually dependent on each other, that some outsourcing companies, like the banks, are “too big to fail.” The Government has got itself into a position where it has little option but to continue pumping money to these firms. 

It already looks as if Serco is in that happy position. In July last year, the company was banned from bidding for government contracts following the revelation that over a number of years they had routinely been charging for “tagging” dead and released prisoners.  However, with a complete lack of fanfare, the Government quietly decided at the end of January to let Serco bid for public services again. The company had simply promised to mend its ways and paid back £82 million. This is despite an ongoing criminal investigation by the Serious Fraud Office into the original fraud. It also ignores public opinion - 58% of people said that if Serco was found guilty, it should be banned from bidding for public service contracts again.

But tagging has not been the only case of creative accounting Serco indulged in to maintain its income. In 2012, it was found that records were falsified over 250 times to cover up gaps and problems in the GP out of hours service in Cornwall. This contract will now be abandoned early.  

Serco has 'form' in cutting and running, giving up contracts early when the going gets tough, irrespective of the consequences for anyone else.  After a misjudged bid, the company decided to withdraw from a management contract at Braintree Hospital in Essex, because it is claimed there are not enough patients.  

Serco does not bid to run public services for the benefit of the community as a whole. As with all outsourcing companies, Serco regards public services as market transactions where decisions are taken on commercial grounds and meeting targets comes before customer service.

If you're sick of Serco, join us at their AGM next Thursday 8th May, 10.30am-11.30am outside the office of Clifford Chance LLP, 10 Upper Bank Street, London E14 5JJ. Let us know you're coming on facebook.