British govt. scrutinizes second outsourcing firm after Carillion collapse

Lawmakers are "very worried" and a team of officials has been created to monitor the business, the Financial Times reported, citing government sources.

Shares of Interserve Plc seesawed Wednesday on a report that the United Kingdom contractor is under government scrutiny after the collapse of rival Carillion Plc.

Carillion issued a second profit warning at the end of September and about five weeks later was awarded a 62 million pound rail contract.

The newspaper said that United Kingdom civil servants had monitored Interserve since a profit warning in September due to concerns over its financial health, citing government advisers and officials.

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"We continue to have constructive discussions with lenders over longer-term funding", a spokesman for the company said.

Interserve, which employs around 80,000 people worldwide, said it was updating the government on the company's progress with its turnaround plan.

It was followed by an even gloomier update in October when it issued a profit warning and said it may breach its banking covenants as it grappled with escalating staff costs, squeezed margins and a flagging performance from its justice business.

Shares in Interserve fell sharply after the disclosure by the Financial Times that it is under special watch by the Cabinet Office.

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A trio of banks yesterday launched an emergency fund worth more than £200 million to help small businesses in Carillion's supply chain.

One Paris-based asset manager described concern around Interserve and Carillion's collapse as signs of the pain Brexit is likely to bring, warning that firms that are nearly entirely exposed to the United Kingdom economy can expect to fare badly.

The Insolvency Service has contacted all of Carillion's private sector service customers, such as those working in facilities and management. The impact of Carillion's liquidation on our balance sheet will therefore be minimal, ' it said, adding that net income from Carillion stood at around £500,000.

'But there are businesses to sell and we believe that shareholders would support a [capital] raise, ' he said.

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