Serco forced to withdraw 'begging' letter to suppliers

Outsourcing giant Serco apologised yesterday for writing a threatening letter to its suppliers demanding rebates to help deliver Whitehall spending cuts.

It came as its shares were the biggest faller on the London stock market, down 4 per cent at 587p, amid investor fears government anger at the heavy-handedness might threaten future contracts.

Serco, which runs prisons, schools and nuclear facilities for the government, had written to nearly 200 of its biggest suppliers to ask for a 2.5 per cent retrospective cash rebate on contracts in the first half of the 2010 calendar year.

But following political and business sector attacks, Serco yesterday retracted the letter and apologised. Its statement said: "As a company that values our relationship with all our supply chain partners large and small, we deeply regret this action, and apologise unreservedly to them for their concern that this has caused.

"Serco yesterday reaffirmed to the Cabinet Office that Serco's most recent offer to the UK government will not result in any of the government's costsaving programme being passed on to our suppliers."