From Kuwaiti canals to welfare-to-work, Interserve has come a long way – quietly

Westminster Outlook Founded by brothers Augustus and Edmund Hughes 130-years ago, the London & Tilbury Lighterage Company was a business to stir the blood.

The group swash-buckled its way through the early 19th century, dredging rivers and shallow seas in Argentina, Kuwait, Burma, Australia, and India – countries that rouse the imagination now, let alone then.

Back in London, the company bought Dreadnought Wharf. During the World Wars the Greenwich wharf built and repaired ships for the admiralty, while machine shops made parts for minesweepers.

Sadly, this business of such great adventure “diversified” after World War II and essentially became just another construction company. By the time the final link to the founding family, Michael Hughes, passed away in 1976 the group was as synonymous with surfacing roads as it was for overseas escapades.

In 2001, it confirmed its commitment to dullness by renaming itself Interserve. The website says “the brand name reflects a commitment to service and delivery across the business”, an abominable platitude unbefitting such a superior history.

As a result, Interserve is often overlooked, even in a week like this one when interim figures showed a 28.7 per cent hike in revenue to nearly £1.4bn.

Yet a tiny bit of PR babble in this largely ignored company’s half-year results captures the extraordinary, fundamental change in relationship between business and state that has been quietly overseen by the Coalition.

Spot the difference in these sentences, the first from 15 August 2012, the second from Wednesday:

We offer advice, design, construction, equipment and facilities management services for society’s infrastructure

We offer advice, design, construction, equipment, facilities management and frontline public services.

In the recent past, there has been either outcry or celebration, depending on your politics, when the nature of how public services are run has altered. If the 1980s were defined by privatisation, so Tony Blair’s domestic agenda was dominated by his overwhelming faith in the Private Finance Initiative, which saw infrastructure built and run by large companies for around 25 to 30 years at an eye-watering annual fee from the taxpayer.

Outsourcing has been criticised, not least by unions that argue handing management of public services to companies is little more than privatisation by stealth. But outsourcing as a concept is less well known to the wider electorate than Mrs Thatcher’s sell-offs or Mr Blair’s PFI “mortgaging” of hospitals, schools and roads.

What’s more, outsourcing reaches whole swathes of public services that PFI and full-blown privatisation never could, from managing out-of-hours GP appointments to looking after the UK’s nuclear deterrent.

What’s fascinating are the types of companies that are exploring these lucrative deals. It made sense that a construction company like Interserve would get involved in PFI, as it would, for example, knock down and build new schools in Cornwall, Telford and Manchester as the major parts of those contracts.

But what on earth is Interserve doing so involved in the UK’s welfare-to-work programme, with a training service for job seekers? What can a construction firm add to the running of the probation service?

This is not to pick on Interserve. What has happened is that construction groups have essentially become programme managers.

Their skills broadened due to the complexities of running PFI projects, where they were paid to make sure hospital receptionists answered the phone by a set number of rings as well as for building a new wing.

Now that they are programme managers, construction companies can move away from the grubby business of building our homes and infrastructure.

A major public building contract for, say, the Environment Agency would offer a margin of maybe 3 to 4 per cent, says one industry insider. Potential bidders might as well go and run a prison at 7 to 10 per cent instead and not take on any of the risk that is characteristically involved in constructing and remodelling buildings.

When Serco was found to have charged the taxpayer for electronically monitoring non-existing offenders last summer, the FTSE 100 giant was referred to as “the biggest company you’ve never heard of” and “the company that is running Britain”.

As Interserve shows, there are plenty of other companies you’ve never heard of that are running the country in what has been an unnoticed yet historic turning point in the way that big business and the state interacts.

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