Refugees Daily - Internal Global Press Review

The government is on the brink of another outsourcing crisis over contracts to house asylum seekers.
Serco, G4S, and Clearel — the three biggest providers — are in emergency talks with ministers to renegotiate the deals, as they struggle to cope with a sharp increase in numbers.

The numbers of asylum seekers that need to be housed by the three companies has jumped from 25,220 people in 2013 when the contracts began, to 36,069 by the end of September this year.

All three companies are making a loss on every asylum seeker they house. They say an eight-year high in the numbers has put "unsustainable" pressure on their business.

The so-called Compass contracts for asylum seekers have had problems in the past. G4S, Serco and Clearel — a joint venture between Clearsprings and Reliance — were awarded a total of six contracts to house 23,000 asylum seekers in March 2012, as part of Home Office plans to save £140m on the service over seven years.

But a National Audit Office report last year found that the companies had taken on rented housing stock without inspecting it, and subsequently failed to meet contractual quality standards.

The contracts have also been run at wafer-thin margins. Serco told the home affairs select committee in 2013 that it was paid revenue of £30.28 per person per night for initial assessment accommodation and £11.71 for ongoing accommodation. It then subcontracted the accommodation to other suppliers, making a profit of only 21p per person per night, which it has now lost.

"It's the exponential, unforeseen increase that is hurting us," said one provider.

The Home Office confirmed it was in confidential talks with the outsourcers, including whether it will take advantage of an option for a two-year extension clause.

Providers say that although it costs about £4,500 a year to house an asylum seeker, the government is paying £3,500 for the 40,000 people in the system, meaning they are incurring at least a £1,000 per person loss each year. The companies also say they are hampered by a shortage of suitable housing.

In the case of asylum seekers who have been refused leave to stay in the UK but do not leave their housing after a 28-day notice period, the providers must cover the cost of the accommodation. "There are dozens of these people at any one time," said one housing supplier.

The Home Office confirmed this was the case. "It is the responsibility of the providers to evict asylum seekers from properties when a decision has been made on asylum applications," it said. "Appropriate notice periods are given to individuals and payment to providers is discontinued at the end of that notice period."

Serco has already written off an expected £115m until the contracts finish in 2019, while G4S has guided investors that losses will be about £25m.

Insiders say one mistaken assumption by the companies when they negotiated the contracts was that the costs per person would fall as the numbers increased. But economies of scale did not emerge, and instead, losses were racked up.

This contrasts sharply with the sums paid per refugee under the Syrian Resettlement Project, under which the government has promised to take 20,000 Syrians by 2020.
That project is being run separately by local authorities, which are receiving about £8,520 to house each refugee.

Serco confirmed it "is losing significant amounts of money on the asylum seeker housing contract". "We continue to have discussions with the Home Office about how we work together to manage a contract which is clearly very different in scale to that which was anticipated at the time of the tender."

G4S said: "We reported an increase in provisions for a number of UK government contracts in our 2014 accounts. The Compass asylum contract was among these and whilst we are working closely and constructively with the Home Office, this programme remains challenging."

Clearel did not respond to a request for comment.