G4S juggernaut keeps rolling along – despite Olympics fiasco

 

The security giant G4S tried to run this year's Wimbledon Championships as a dry-run for the Olympics which it has been paid millions to secure. One bag-searcher at the gates of the All England Club had obviously had the Games drill deeply ingrained; "enjoy the Olympics," he said to bemused Wimbledon-watchers, before correcting his mistake – "I meant the tennis."

Alas, he might well have been the most Games-ready person in the whole of G4S.

The FTSE 100 security giant – which is the world's second-biggest private-sector employer – failed at the first hurdle of the most high-profile contract it has ever received. Its admission that it cannot supply the 10,000 Olympic guards it was paid to put at the Games gates means an extra 3,500 members of Britain's armed forces are having to be drafted in. This brings the number of troops deployed at the Games by the Ministry of Defence to 16,500, which is 7,000 more than are fighting in Afghanistan.

Yet just three months ago Mark Hamilton, G4S's managing director of Olympic security personnel, was gloating: "Our campaign to recruit over 10,000 personnel for the Games continues apace. Already, 67,000 people have booked an interview, 3,000 recruits have commenced training and another 1,400 have been deployed to Olympic venues."

Overall, G4S was set to receive about £200m for searching spectators' bags and vehicles, protecting athletes, patrolling sites and operating X-ray machines at the numerous Olympic venues. Ministers have already said that with G4S supplying fewer guards, its pay will be lower.

But that will hardly make a dent on G4S's bottom line. The company's revenues hit £7.5bn last year, with profits of £279m. A contract worth a couple of hundred million was just pocket money, more about giving G4S a reason to shout about itself than the revenues – which makes the group's high-profile staffing problem even more embarrassing.

For G4S is massive. This is a business that spookily declares on its own website: "In more ways than you might realise, G4S is securing your world."

Growing from four guards on bicycles peddling their protection services as "Night Watch Services" in 1935, it has multiplied like bacteria and gobbled rivals – most significantly in 2004's merger of Securicor and Group 4 Falck – to today have 657,000 employees.

Working in more than 125 countries, its guards provide bank security, airport border controls, protect more than 40 embassies around the world, including Afghanistan's, and even work as matchday stewards at Sheffield Wednesday games.

Serco, the outsourcer which has an equally voracious appetite for taking over British public services and already runs prisons and schools, is known as the "biggest company you've never heard of". Unless you're a prisoner or study the lapels of Wimbledon or Sheffield Wednesday goons, G4S might be a contender for the same title.

But it wants more. The chief executive Nick Buckles – licking his wounds from his failed £5bn takeover move for Danish group ISS, which was derailed in November by a major shareholder rebellion – is eyeing up Britain's public sector with increasing hunger.

Already G4S has taken on hordes of former Government jobs: it runs six British prisons – including in Birmingham, where inmates were locked in their cells for almost a day after a set of keys fitting every cell door went missing last year. It operates prisoner-tagging schemes – which last year saw G4S staff attach an electronic monitoring tag to the false leg of a one-legged criminal, meaning he could leave it at home. It's a partner helping to run GCHQ, the Government Communications Headquarters. Its automatic number-plate recognition business is used by the police to track vehicles and petrol stations to trace non-payers. It has huge, back-office roles in the NHS and in schools, and it's installing smart meters in all of the UK's homes.

British public-sector contracts made up 15 per cent of G4S's revenues six years ago – now that figure is at nearly 30 per cent.

More prisons are set to be next in line for the G4S treatment – eight are being put out for private-sector bids and City analysts reckon G4S will nab at least two – as are the Government's medical-assessment contracts. Ministers plan to test recipients of disability benefit for their entitlement, and are to put out five contracts to the private sector worth tens of millions of pounds a year. Again, the City expects G4S to capitalise.

The police will be next. G4S signed a £200m, 10-year deal with Lincolnshire Constabulary to design, build and run a police station in the county last year.

Two-thirds of the force's staff were transferred to the private sector, with police wearing a uniform combining the name of the force with G4S's company logo.

There are also plans to privatise swaths of the Surrey and West Midlands police forces, with officials having drawn up a shortlist of six groups – including G4S – bidding to take over "middle and back-office functions", potentially including contracts to carry out forensics and investigate crimes, as part of a £1.5bn deal.

There were minor signs of an anti-G4S rebellion yesterday, when Surrey Police Authority voted to halt plans to outsource services following the group's Olympic failure. In the West Midlands, unions are still fighting the initiative, with Unite's general secretary Len McCluskey saying: "The fiasco G4S has made of security at the London Olympics should serve as a very clear warning to any police force contemplating using this outfit to provide core police services.

"Yet again, a public service is forced to mop up after a failing private contractor. If G4S can cut corners with the Olympics, then it doesn't bear thinking about what they will do to essential police services like 999 call handling or forensics."

That's far from the only G4S controversy. In 2010 it received hundreds of complaints, including allegations of assault and racism, from illegal immigrants held in G4S detention centres. Later that same year, Angolan detainee Jimmy Mubenga died after being restrained by G4S guards before a flight from Heathrow to deport him took off. Three guards were arrested on suspicion of manslaughter and remain on bail.

Its faced protests, too, for its work operating Israeli settlements in Palestinian West Bank territory seen by the UK as illegal.

But despite all those issues and G4S's Olympic disaster, shares yesterday fell less than 3 per cent, taking them to 283p – and are this year at a record high.

In the City, the odd migrant death and PR slip doesn't seem to make a dent on analyst expectations of a public-sector contract bonanza.

"G4S is a very important supplier to the Government," said Julian Cater, head of support services research at Canaccord Genuity. "Do I think they will continue to be so [after the Olympics debacle]? Absolutely, especially given the volume of contracts being put out to tender right now. There's clear evidence of a pick up in public-sector bidding activity now and the likes of G4S, Capita, and Serco will benefit.

"They are going to be delivering a very significant number of functions – you will see more and more deals like the Lincolnshire police contract over the next five years. Other police organisations are looking to outsource not only back-office processes, but the custody of prisoners and more, and G4S has a well-established business in the prisons marketplace."

Come court case or controversy, the G4S juggernaut rolls on.

Profile: Nick Buckles

Forget the cat, the boss of the security giant G4S has already used at least two of his nine lives. Last year, when the FTSE 100 firm faced embarrassment – and high costs – when its £5.2bn plan to buy the cleaning giant ISS fell through, the company's chairman, Alf Duc-Pedersen, quietly announced that he would retire from the board. Mr Buckles, meanwhile, took home £5.3m in the year, giving up his annual bonus but still pocketing a huge package thanks to share schemes. He built up his pension pot to almost £9m too. Now he has to weather G4S's embarrassing Olympic debacle.

Keith Vaz, chairman of the Commons Home Affairs Select Committee, has demanded that Mr Buckles should appear before the committee next week to explain himself.

Millions in the bank and parliamentary demands: it's a long way from where he was set to begin his career – at Avon Cosmetics. He was offered a job as an analyst there, but the lure of Avon's ladies lost out to a graduate job at Securicor, because the security firm offered him a Ford Escort. The son of a dinner lady and policeman worked his way up to chief executive of the firm by 2002, then led Securicor's merger with Group 4 Falck in 2004 and became G4S's chief executive in 2005.

Mr Buckles, who names his favourite possession as his mobile phone, admits: "I can't say I have ever read a book." Shareholders, however, might be wishing he'd made the Olympic security rule book his first full-length read.

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