February 1, 2018 / 1:24 PM / 19 days ago

After meeting Capita, Britain says it is not another Carillion

LONDON (Reuters) - A British government minister on Thursday played down comparisons between outsourcing company Capita and collapsed rival Carillion after officials met the company’s senior executives following its profit warning.

Capita lost nearly 50 percent of its market value on Wednesday after its new boss issued the profit warning and set out plans to raise cash to avoid the same fate as Carillion.

Junior cabinet office minister Oliver Dowden told parliament that officials from his department met with Capita executives after it cut profit forecasts.

“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,” he said, adding he understood the interest in Capita given the experience of Carillion, which collapsed under large debts last month.

“But I can assure members that this company is in a very different situation.”

Capita provides vital services in Britain from running the system that pays National Health Service dentists to hospital triage support, collecting the congestion charge for driving in central London and helping retailers to manage online shopping sites.

The government has defended its use of outsourcers. Dowden said the steps that Capita took on Wednesday to strengthen its balance sheet, such as stopping dividend payments, showed that it was acting responsibly.

“Arguably these are exactly the measures that could have prevented Carillion from getting into the difficulties that they did,” he said.

“This is further evidence of shareholders and not the taxpayer taking the burden on this.”

The government has been criticized, however, for its approach to these contracting companies.

Opposition Labour party member of parliament Rachel Reeves said that government thinking was “muddled and complacent”.

She urged the government to reconsider decision to outsource other services, saying there were more similarities than differences between Capita and Carillion.

“Jobs, pensions and small businesses and vital public services now depend on these outsourcing companies. But it’s time we rethought the whole strategy for public service provision,” Reeves said.

“How many more warning signs does this government need?”

Reporting by Alistair Smout; editing by Stephen Addison and Jane Merriman

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