James Moore: Maudlin Mouchel and a sign of the times

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The Independent Online

Outlook So another nasty set of numbers from another contractor relying on the public sector for its bread and butter. This time it's Mouchel with the profits warning. It will report earnings of £30.5m when the City had expected £35m. So not a Connaught car crash (at least not yet) but it is anything but pretty and the shares duly took a hammering, losing 13 per cent of their value by the end of the day. No wonder. When trading statements try to reassure about borrowings and mention "talks about refinancing loan facilities" can you blame shareholders for feeling nervous?

With an eye on this, the company has opted to rely on what is rapidly becoming a faithful standby for the entire industry. Don't worry your sweet little heads, says Mouchel, the future's looking bright because the coalition's going to outsource loads of services to us and then we'll be raking it in.

This mantra is being repeated so often that it has just a hint of desperation about it as companies try to find something positive to say about the impact on their numbers of George Osborne's cutbacks.

From the taxpayers' point of view, it might be better if Mouchel's optimism is misplaced. The benefits of outsourcing are debatable at best in purely financial terms, not least because of the state's ham fistedness when it comes to the matter of drawing up contracts, running tendering processes, and dealing with the commercial sector in general.

Then there's the issue of quality control, which all too often flies out of the window until it's too late (which leads to yet more expensive legal issues). Mouchel is, itself, in the midst of a nasty little spat with Westminster Council over a parking contract. If Mr Osborne really wants to save money he might be better to throw out any fond ideas that he can achieve his aims through outsourcing.