Mr Speaker, I have been asked to comment on the stock market
update issued by Capita plc yesterday and its impact on the
delivery of public services.
I completely understand that this is a matter of significant
interest to many in the House, following the recent failure of
Carillion.
But I can assure members that this is in a different situation.
To be clear, this announcement was primarily a balance sheet
strengthening exercise not purely a profit warning and indeed, as
has been widely reported, the company has significant cash
reserves on its balance sheet.
We do not believe that Capita is in any way in a comparable
position to Carillion. Further, Capita has a different business
model.
The issues that led to the insolvency of Carillion will come out
in due course, but our current assessment is that they primarily
flowed from difficulties in construction contracts, including
overseas.
By contrast, Capita is primarily is a services business and 92%
of Capita’s revenues come from within the UK.
We regularly monitor the financial stability of all our strategic
suppliers, including Capita. As I’ve said, we do not believe that
any of them are in a comparable position to Carillion.
The measures that Capita has announced are designed to strengthen
its balance sheet, reduce its pensions deficit and invest in core
elements of its business. Arguably these are exactly the measures
that could have prevented Carillion from getting in to the
difficulties that they did.
And of course the impact of this has been to reduce dividends and
shareholder returns in favour of others. This is further evidence
of shareholders and not the taxpayer taking the burden.
My officials met with senior executives of Capita yesterday to
discuss the impact of the announcement. We continue to work
closely with the company to monitor the execution of its plan,
and, of course to ensure the continued delivery of public
services.
We continue to engage with all of our strategic suppliers and
make continuing assessments as appropriate of our contingency
plans where necessary. It would not be appropriate for me to
comment in any further detail on the specifics of those
contingency plans given the commercial sensitivity of them.
The priority of this Government and the reason why we contract
with these companies is to deliver public services and our
priority is the continued delivery of those public services. In
respect of the collapse of Carillion, whatever the shortcomings
there, public services continued to be delivered and we are
confident that public services will continue to be delivered as
provided by Capita.
