ALEX BRUMMER: Labour’s false narrative on Serco’s Test and Trace

Serco is not among Britain’s best-loved companies, in spite of the mammoth effort by Rupert Soames to restore its standing.

The outsourcer’s reputation was badly scorched in 2019 when it paid £23million to the Serious Fraud Office as part settlement over cheating on its electronic tagging contracts.

For all its faults, though, it does not deserve to be traduced by Labour’s deputy leader Angela Rayner.

Tweeting twaddle: For all its faults Serco does not deserve to be traduced by Labour’s deputy leader Angela Rayner (pictured)

Her regular tweets pointing to ‘Serco’s £22billion failed Test and Trace’ are a shameful perversion of truth and make one question how Sir Keir Starmer can allow such a loose cannon to hold high office in a reformed post-Corbyn party.

It is good that chief executive Soames finally is seeking to put the record straight. Serco’s Test & Trace (T&T) contract was worth £350million in the last financial year, a fraction of the £22billion false news put about by Rayner. 

The revenues for the whole of Serco last year, both in the UK and overseas, were £3.9billion. Just 1 per cent of Serco’s profits of £163million, up one-third on the previous year, came from pandemic work.

Soames admits it took a time to get T&T up and running from a standing start. But with 2.5m people a week now being tested and a further 1m being tracked by telephone, the numbers are up there with the speed of vaccination.

Much of the group’s income now derives from North America, where it delivers services for the Canadian and US governments and municipalities, as well as the defence establishment. 

It recently strengthened its defence work with a £221million acquisition of a firm servicing the US Air Force.

Labour’s finger-wagging leader urgently needs re-education on Serco’s dividend policy. The idea that dividends are for the wealthy must be thoroughly squashed.

Most of the pay-out will be heading into the pension funds of ordinary working people across the country. In addition, the group is delivering a £5million bonus directly to 50,000 employees across the globe who have helped keep government services up and running. 

Serco may not be a corporate saint. But the least that is to be expected is accuracy from the opposition benches.

Tech-tonic plates

As founder of the UK’s most impressive fintech firm Worldpay (now in American hands), Ron Kalifa deserves a hearing.

His fintech review points to the ways in which finance in the UK needs to adapt if it is to take full advantage.

Britain already has one of the largest fintech sectors worth £110billion, with the potential to swell to £380billion by 2030.

But London is failing to capture initial public offerings (IPOs), winning just 5 per cent of 3,300 floats in the period 2015-2020 against 40 per cent which went to Nasdaq.

Kalifa recommends easing the rules allowing founders to hold onto more equity control through a dual class of share listings.

He also wants to unlock the funding of UK-based asset managers and insurers. At present they are hidebound by the EU’s Solvency 2 rules. 

He would like to see the restrictions swept away to make sure more long-term investment comes from Britain directly as well as from overseas.

Among Kalifa’s more intriguing ideas is that the Bank of England, together with the Financial Conduct Authority, become the pioneers in cryptocurrency regulation and creation. 

Bitcoin and its followers are here to stay but better that the UK, which has been a leader in fintech through its ‘sandbox’ concept, be in charge than the Chinese. He argues that central bank crypto-currencies, like contactless cards and banking apps, are here to stay.

Time to embrace rather than reject.

Debt collectors

The rise of the brothers Zubar and Mohsin Issa, the new owners of Asda, is one of the great inspirational tales of our time.

What is of more concern is the debt-fuelled model of their empire, with loans soaring to £7.4billion (or six times earnings) when they complete the acquisitions of Asda forecourts and a chain of German petrol stations, OMV.

Forecourts offer great cashflow, as Gerald Ronson at Heron has demonstrated down the ages.

The same goes for grocery. Stratospheric debt requires costs to be squeezed, so jobs at Asda will have to go.

The bigger longer-term danger is the spike in interest yields on bond markets. Cheap debt can become burdensome very quickly.

Ask Debenhams, Intu, Cineworld et al.

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