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Thu September 16 2021

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Interserve draws up living will

13 Dec 18 Interserve has produced contingency plans in case it does not survive its financial problems.

Interserve has become one of the first companies to draw up a so-called living will, under a scheme initiated by the Cabinet Office after the collapse of Carillion.

It has also emerged that subcontractors are being warned not to take on any work for the company.

When Carillion filed for insolvency at the start of 2018, it caused chaos across the public services that it supplied. To prevent a repeat of this the government has recently announced plans for all suppliers to draw up resolution plans in the event of their collapse, to ensure continuity of services and, where necessary, to enable another provider to step in.

“We prefer to call them resolution plans rather than living wills,” Cabinet Office minister Lord Young told the House of Lords yesterday.

“Interserve has volunteered to lead the way as one of the first suppliers to design one of these resolution plans,” he said.

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However, he also said that Interserve has full Cabinet Office backing in its planned financial restructuring. In fact, Interserve is taking the action today that Carillion should have taken a year ago, he said.

On Monday Interserve revealed that it was in negotiations with lenders to give them shares in the business instead. The company's share price plummeted as a result, making the business worth just £10m. It has debts of £700m.

Lord Young of Cookham, formerly the housing minister George Young, aka the bicycling baronet, said: “It is worth making the point that Interserve is very different from Carillion. Interserve is now taking the action that Carillion ought to have taken — to restructure its balance sheet and improve its robustness — and, unlike Carillion, it does not need new money. It needs to turn debt into equity. It is not accurate to make a direct comparison between the two companies.”

He said that the government was in regular contact with Interserve to monitor its performance. “Not only does the Cabinet Office have overall responsibility for monitoring the health of the company, but individual government departments that have contracts with Interserve have a dialogue with it about those specific contracts.”

Liberal Democrat Lord Fox revealed that Rudi Klein, chief executive of the Specialist Engineering Contractors’ Group, is advising members not to work for Interserve. “The minister’s response seems very relaxed in the light of what is actually going on,” Lord Fox said.

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