G4S share price: security companies lose tagging contracts

on Dec 12, 2013
Updated: Oct 21, 2019

iNVEZZ.com, Thursday, December 12: G4S Plc (LON:GFS)and Serco Group Plc (LON:SRP) have lost their contracts for tagging criminals in the UK following allegations that they had overcharged the government for these services. The Justice Secretary Chris Grayling said today that the contracts will be handed to rival Capita on an interim basis.

In today’s London trading G4S shares were down 0.86 percent to 258p as of 15:08 UTC. Serco’s share price lost 1.5 percent to 438p.
Earlier this year the Serious Fraud Office (SFO) opened a criminal investigation after information surfaced that G4S and Serco had overcharged the government over electronic monitoring of criminals. Some of the tagged offenders were found to be dead, in prison or overseas. The probe followed an audit by accountancy PricewaterhouseCoopers which found that the overcharging began at least as early as 2005, when the current contracts began. In the wake of the scandal, the UK government has decided to strip the two companies from their tagging responsibilities.

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“We have signed a contract with Capita to take over the management of the existing electronic monitoring services on an interim basis,” said Justice Secretary Grayling in a written statement. “This will mean that management of these services, which are now operated by G4S and Serco, will transition to Capita by the end of the current financial year.”

Grayling also said that Capita will use the systems and the equipment of Serco and G4S, but the two outsourcing groups “will no longer have a direct role in delivering the service on the ground.”

Capita is looking to bid for taking the contracts permanently. Both G4S and Serco withdrew last month from the race for future tagging contracts, which were due to expire at the end of March, next year.
**Prison contract**
Last month the two security groups issued apologies in relation to their actions, admitting that they were wrong. (G4S share price: Security groups apologise for tagging overcharges). However, it will certainly take time for both companies to restore the trust of their most important customer – the UK government.

Last month Serco missed out on a contract to run three prisons in the UK, as the government decided to keep them in public hands (Serco share price: outsourcing group loses prison contract). At the time Grayling cited the ongoing investigation in relation to the overcharging scandal as the reason for the decision.
**As of 15:30 UTC buy G4S shares at 257.80p**
**As of 15:30 UTC sell G4S shares at 257.60p**
**As of 15:30 UTC buy Serco shares at 438.40p**
**As of 15:30 UTC sell Serco shares at 438.10p**
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