Serco's (SRP) shares tumbled 11 per cent as first-half results were dramatically overshadowed by further woes in the outsourcing group's government contracts. The Ministry of Justice and Serco announced that they have jointly asked police to look into alleged fraudulent behaviour by Serco staff handling its prisoner escort contract. Serco has agreed to pay back profits earned since the contract was renewed in 2011 and also forgo any future profits. The contract was valued at £285m over a term of seven years.
Serco, already in hot water with the UK government for overcharging on electronic tagging contracts, now faces an uphill battle to win back trust. The government has given the company three months to get its house in order and after that a committee will decide whether Serco can return to the table or is to be excluded from all new and future work with government. "We will do everything possible in the next three months to reassure government," said Serco's chief executive Christopher Hyman.