Interserve is best known as a Carillion-style outsourcing firm with a string of government contracts, but its woes are much more to do with it joining a government-sponsored effort to build almost useless infrastructure.
The infrastructure in question is the network of energy from waste (EFW) plants dotted about the country. As successors to bog-standard incinerators they are supposed to be efficient, but they use untested technology and are not as efficient as billed because about half of the power they generate is used to clean the emissions they produce.
Worse, they are being built at a time when there is a huge surplus of EFW capacity across Europe as countries turn to recycling rather than simply burning waste.
You might think that Lord Blackwell, Interserve’s from 2004, and its chief executive Adrian Ringrose, who ran the show from 2003 before they both bailed out in 2016 and 2017 respectively, would have seen the dangers of stepping into the incinerator industry. Apparently not.
The government is a big fan of incinerators as a quick way to redirect waste away from landfill. Almost every county and city in England has one or has commissioned one.
For environmental campaigners, the situation is so dire that some councils have found themselves signing contracts to provide incinerators with levels of waste that far exceed the needs of the local population, leaving them no option but to burn stuff that could be recycled.
Maybe Ringrose and Blackwell saw this as an exciting opportunity with a guaranteed income stream, one that could be bolted on to the boring facilities management contracts it has with government departments. The exciting opportunity offered by taking over probation services in England was also too good to miss.
Now the company is paying tens of millions of pounds to extricate itself from EFW contracts while its partners accuse Interserve managers of not really understanding the business and missing contract deadlines.
The deals at the heart of the problem are in Derby and Glasgow, and it would be unfair to say all the delays are Interserve’s fault. The main supplier of the gas turbines for the incinerators pulled out last year, leaving the projects high and dry. Determining fault is for the lawyers, but in the meantime Interserve struggles on.
Downturn blues?
A recession next year is looming without a dramatic turn of events. That’s the outlook presented by the latest GDP numbers.
They show that the economy went into 2018 with modest momentum only to dive when the Beast from the East arrived in March. A pick up in the summer given an extra lift from the World Cup provided some respite, but the three months to October have been dire.
We know from most business surveys that not much changed in November, and December is looking decidedly subdued.
This pattern shows the economy is heading into the new year without any momentum, and any further hits to output will be reflected in negative GDP numbers.
One remedy could be an upswing in consumer spending across the continent that boosts UK exports. Another would be a second referendum that keeps the UK in the EU’s single market. Even Donald Trump ending his trade war with China could bring the kind of confidence boost that businesses are looking for.
Any of these could help avoid a recession next year., but with parliament deadlocked and the prime minister unable to chaperone her Brexit deal through without it being shredded, the uncertainty persists. In the rest of Europe, confidence is waning and Trump remains at loggerheads with Beijing. No wonder the pessimists feel vindicated.
