Fears for Scottish construction work as Interserve faces shareholder vote

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Emergency plans have been drawn up by Scottish public organisations as a large government contractor faces a crucial shareholder vote on its future tomorrow.

If Interserve shareholders don’t back a rescue package for the construction and management firm on March 15, it will go into a pre-pack administration next week.

Sources close to the company say that the pre-pack plan will not impact the redevelopment of the National Gallery in Edinburgh. Picture: Contributed

Sources close to the company say that the pre-pack plan will not impact the redevelopment of the National Gallery in Edinburgh. Picture: Contributed

Sources close to the company say that the pre-pack plan will not result in job losses or impact its major Scottish projects which include the £22m redevelopment of the National Gallery in Edinburgh and the £9m improvements to the vital A737 route from Paisley into Ayrshire.

But the organisations involved say they have already put contingency plans in place to deal with any potential outcome.

Interserve also holds a night time security contract with the home of the Chinese pandas, Edinburgh Zoo, as well as a maintenance contract with the Scottish National Blood Transfusion Service’s Jack Copland Centre.

The company employs 45,000 people in the UK and earns two-thirds of its £2.9bn turnover from UK government contracts. The news of its financial difficulties comes just a year after Carillion, the UK’s second largest construction company employing 20,000 people and also reliant on government contracts, went bust.

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The Scottish Government said it is “monitoring the situation closely” and is in “regular contact with relevant public sector bodies who have current contracts with the company”.

Currently Interserve’s major public contracts in Scotland are the redevelopment of the basement levels of the National Galleries at the Mound in Edinburgh, the construction of an Avian Research Centre for Scotland’s Rural College in Midlothian, the maintenance of the Jack Copland Centre and the design and construction of the A737 improvement works,

It is believed that Transport Scotland is confident it could procure a new contractor in with EU rules within shortened timescales should the need arise.

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A spokesperson for NHS National Services Scotland, said that its main contractor, Seacole National Centre Limited - which appointed Interserve - already has plans in place to “manage a service provider insolvency event”, while an Edinburgh Zoo spokesperson stressed that “contingency plans” are in place should Interserve fail to meets it contractual requirements to ensure the security of the zoo would not be compromised.

The National Galleries of Scotland is also closely monitoring the developments at Interserve. A spokesperson said they were liaising with external advisers in terms of any steps which “we may need to take following Interserve Plc’s extraordinary meeting of shareholders on Friday.”

While Scotland’s Rural College’s Avial Research Centre is almost complete, as it is scheduled to open in May, a spokesperson said it had “robust processes” in place. “To reduce financial risk and to comply with Scottish Government policy, a separate project bank account is used to pay a main contractor and any sub-contractors that have chosen to be paid by this method.

“We also put in place a bond in case a main contractor ceases trading. Should Interserve enter administration, we understand that there is no risk to the nearly completed contract.”

But sources close to Interserve say they are confident there will be no change to its operations, and there will be no Carillion-style collapse.

One said: “If the transaction is voted down, a pre-pack will occur on Monday and business will carry on as usual. All the work has been done in advance. The new Interserve will emerge with considerable strength, regardless of the outcome on Friday.”