Serco chairman to leave troubled government contractor

Police standing in front of a Serco van Image copyright AFP
Image caption Serco operates some UK prison services, and has contracts at defence and health facilities.

The chairman of Serco, the beleaguered outsourcing firm that has several contracts with the UK government, has announced he will leave the company.

In a statement, Alastair Lyons talked of "operational mis-steps" at the Hampshire-based group, for which he said he took "ultimate responsibility".

However, Mr Lyons said he had not been forced to resign.

Serco, which operates in UK prisons, military bases and hospitals, has suffered heavy losses in recent months.

The company, which also provides facilities to many local governments, reported in August that it had made a pre-tax loss of £7.3m for the year, due to reorganising costs and loss-making contracts.

Last week, the firm's woes deepened after it announced that profits for 2014 were likely to be reduced yet again - by £20m - and cut its forecast for 2015.

Serco also said it had incurred £1.5bn in writedowns connected to losses on contracts, which led investors to dump their shares, wiping a third off the firm's market value.

Commenting on his departure, Mr Lyons said: "Whilst colleagues have asked me not to resign, it has been my intention to step down once a new strategy and direction for the business were in place.

"I am, therefore, taking the necessary steps to ensure an orderly process for my own succession during the first half of 2015."

The bad news came amid a company-wide review, launched to investigate a number of failed contracts including a scandal over tagging criminals.

In 2013, Serco was given a six-month ban on securing new UK government contracts after it was accused of charging for tagging people who were either dead or in jail.

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Following much-publicised failings at a rival contractor, G4S, UK outsourcing businesses have come under increased scrutiny.

According to a report by the National Audit Office last year, contracting by the likes of Serco, G4S, Atos and Capita, accounts for "around half of the £187bn that the public sector spends on goods and services each year".

The same report highlighted that the government's spending watchdog had to rely to a great extent on information volunteered to them by the four companies in order to assess whether they were making excessive profits.

In May, Rupert Soames, formerly chief executive of engineering firm Aggreko, took over as boss of Serco, charged with reversing the firm's fortunes.

Despite its recent decline, Serco services a large portion of both central and local government contracts.

In some areas of the UK, its work includes out-of-hours GP services, as well as street cleaning facilities, and environmental services.

Serco also runs many UK transport services, including Northern Rail and Merseyrail, but recently lost a 17-year-old contract to run London's Docklands Light Railway.

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