Capita crashes, but it will survive to win more Government contracts, more's the pity

Analysts have called for a discussion about whether it needs to shrink. The Government needs to hold a wider one about the use of companies like this to provide state services, given how frequently things go wrong. But it won't

James Moore
Thursday 02 March 2017 17:26
Capita collects TV licence money for the BBC
Capita collects TV licence money for the BBC

The little loved outsourcing company Capita has just reported an ugly set of results. It's parting company with its chief executive, has seen £300m wiped from its market value, and is set to get booted out of the FTSE 100.

I image most people can bear its misfortunes with a great deal of fortitude. The company is in the middle of a nasty scandal over its collection of TV licence money on behalf of the BBC, which is investigating allegations that collectors, motivated by an aggressive incentive scheme, targeted vulnerable people.

It also runs much criticised assessments of the eligibility of disabled people for personal independence payments on behalf of the Department for Work & Pensions. That business led to calls for an investigation last year after Channel Four caught one assessor on film dismissing a claimant’s “disability known as fat”.

The broadcaster's Dispatches team sent a psychiatric nurse through Capita’s disability assessment training, where a senior staff member urged him to do “as many assessments a day as you can possibly manage”. Drag 'em in, get 'em rejected, and put another penny on the shareholders' dividend.

Oh and it looks after the London Congestion Charge too.

For one company to perform just those three wildly disparate functions well would be quite something. But Capita does far more than that.

Here’s a list of operations culled from its website: business process management, business transformation, corporate and administration services, customer management, debt solutions, digital and software solutions, financial services, HR and recruitment, information technology, legal services, procurement, property and infrastructure, travel and events.

With all that on its plate, is it any wonder scandals keep on emerging? The ones I referred to above are just the most recent.

The phrase jack of all trades, master of none springs to mind. The company’s results certainly bear that out. Pre tax profits fell by a third. Underlying profits, predicted to be £515m in the most recent profit warning, landed at £475m.

Chief executive Andy Parker, who will depart later this year, described 2016 as “a challenging year”. No kidding. He says the company has streamlined its structure, improved accountability. It’s pulling out of some areas, but still boasts about a bid pipeline of £3.8bn.

That might provide some consolation for Capita shareholders. It’s highly debatable whether the same is true for the public, if and when people end up encountering Capita either directly or indirectly through the services the Government contracts with it to provide.

For their contracts companies like Capita bid against other companies, and cost seems to be the only criteria that matters when it comes to selecting the winners.

Driven to provide services cheaply, and turn as much of a profit as possible when so doing, is it any wonder that scandals such as those I’ve just referred to emerge with such regularity?

It isn’t just Capita, of course. There is a long and sorry list of outsourcing outfits that have hit problems in recent times. Governments, of all colours, never seem to see the problem. The companies they do business with try to do to much, are spread to thin, and are often managed badly.

“The appointment of an external successor (to Mr Parker) will revive discussion regarding whether Capita needs to shrink back to a higher quality core,” opined analysts at Jeffries. Again, no kidding.

A no less pertinent discussion should be held over whether companies like it should be allowed to play such a key role in the provision of state services. But I very much doubt whether it will be held. So Capita will survive to win more Government contracts.

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