Serco secures £415 million London prison contract

LONDON Mon Jul 5, 2010 8:28am BST

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LONDON (Reuters) - One of Britain's leading outsourcing companies, Serco, has signed a contract to run a new London prison, in the face of concerns that public spending cuts could mean fewer deals for support services firms.

Serco, which runs London Transport's DLR monorail and detention centres in Australia, said its consortium signed a contract worth 415 million pounds with the Ministry of Justice to build and manage a prison at Belmarsh West in London.

"Construction works will begin immediately, with completion expected in the first half of 2010. Equity and debt finance has been secured from third parties," the company said in a statement on Monday.

The prison will be built with Serco's construction partner, Swedish firm Skanska, for whom the deal is worth 100 million pounds. The consortium also involved voluntary sector organisations Turning Point and Catch 22.

The company said last year that its consortium had been named preferred bidder to run the prison along with another prison in Liverpool. It expects to sign that contract later this year. The Belmarsh contract will run for 26 and a half years.

Last week Justice Secretary Kenneth Clarke said deep cuts in public spending will require a new approach to dealing with crime and punishment with more emphasis on community sentences to curb re-offending rates.

Britain's' prison population reached a record high in May of 85,201, one of the highest in Western Europe. The Belmarsh West prison will house 900 adult male prisoners, Serco said.

Serco's signing of the contract could allay worries among some investors that the Treasury's planned belt-tightening for prison funding will have a direct impact on big outsourcers which depend on bulky government contracts.

Shares in Serco tipped up by 0.3 percent at 0719 GMT to 569 pence.

(Reporting by Golnar Motevalli; Editing by Matt Scuffham)

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