Outsourcing giant Serco has unveiled a £400million boost from Covid contracts and handed its shareholders a major reward.
Labour said the news will “outrage taxpayers” after the Test and Trace giant celebrated a 75% boost in operating profit last year.
Test and Trace – run mostly by Serco and Sitel – was plagued by controversy for months after failing to reach hundreds of thousands of contacts of people with coronavirus.
Today Serco chief executive Rupert Soames admitted the system took “quite some time” to work effectively.
But the firm today issued a profits upgrade for 2021 and said now is the time to make the 1.4p-a-share payments to investors, its first since 2014.
The firm’s annual report moaned “much of the criticism” about Test and Trace “was wildly unfair and bore little relationship to the facts”.
Its annual report admitted the firm had to act “responsibly from a reputational perspective at this challenging time”, but claimed “Serco as a company has been saved by its shareholders” and should be rewarded.
The report did not say how much the dividend would cost in total – because it still needs to be approved by an AGM.
Chief executive Rupert Soames said that although underlying trading profit had jumped 36% to £163 million in 2020, only around £2 million came from winning Covid-19 contracts – the rest coming from “normal operations of the business”.
Serco added around £400 million to its revenues from Covid-19 services, including operating more than 25% of NHS Test & Trace sites and half the Tier 3 tracing capacity.
They said previously claimed furlough cash has been repaid, a £5 million bonus was shared among 50,000 frontline workers, while levels of profit from winning Covid-19 contracts was minimal.
Mr Soames added: “Although these contracts are at lower margins than we would normally accept for this type of work, they generated nearly £350 million of revenue, so made a material contribution and helped to reduce the impact of losses in Transport, Health and Leisure.”
But Labour’s Shadow Cabinet Office Minister Rachel Reeves said: “It will outrage taxpayers that their money – meant to fund a contact tracing system which has never been up to scratch – is instead being paid to Serco shareholders via dividends.
“It’s typical of this government’s appalling waste during this pandemic.
“They should have done with contract tracing as they rightly did with the vaccine – place it in the hands of our NHS and our local communities, instead of using it to hand huge profits to Serco.”
A staggering £22bn has been allocated to Test and Trace, although the amount paid for contact-tracing is smaller – it came to £432million on contact-tracing in the four months between June and September last year.
Much of the work that was handled by Serco and Sitel has since been turned over to council contact tracers who critics say do a better job.
At one point last summer call handers were being used just 1% of the time – yet when cases surged they were unable to reach as many as 40% of close contacts of people with coronavirus.
Mr Soames today insisted Test and Trace “is now a remarkable success”, but “I acknowledge it has taken quite some time to get there”.
He told BBC Radio 4’s Today programme: “As of last week there are as many people being tested every week as we’ve vaccinated, about 2.5 million people a week.
“In the first week of January there were about 1 million people who were traced through the system.”
Mr Soames added that Test and Trace had a “bumpy start”, but said a system of its kind had “never been done before in the UK”.
Yet Pascale Robinson, campaigns officer at We Own It, said: “The company’s CEO Rupert Soames has the gall to claim that Serco’s management of contact tracing has been a ‘remarkable success’ – when we know that the opposite is true.
“Instead of doling out dividends, Serco should do the right thing, recognise its total failure and give back the money that it has taken in coronavirus contracts.”
He added: ”People will be rightly outraged to hear that Serco has just started paying out dividends to its shareholders. They’ve pocketed millions of taxpayer’s cash to deliver a contact tracing system that has clearly failed to deliver and put people’s lives needlessly at risk.”