Labour demands answers from government over Kier’s woes

Labour is piling the pressure on the government to explain what impact Kier’s financial problems and its decision to get rid of 650 people by the end of this week will have on its ability to carry out public sector work.

Around half of the firm’s £4.5bn turnover is through public sector jobs and last month it was handed a high-profile scheme by the Ministry of Justice to build a £250m prison in Wellingborough.

Under the plans, Kier will cut a further 550 jobs by the middle of next year.

Now in a series of written questions, tabled last Wednesday, shadow Cabinet Office minister, Jon Trickett, has asked his counterpart David Lidington to come up with reassurances that a string of public sector jobs will not be left high and dry by Kier’s problems.

Among the questions Trickett wants answers to are whether the jobs cull mean Kier will be unable to fulfil its public sector contracts while he wants to know whether the government has been speaking to the firm in order to get assurances these contracts won’t be hit by problems in the future.

Trickett has also asked whether the Cabinet Office is going to pressure the firm into improving its payment record on public sector jobs.

Last week Building revealed that Kier's outgoing finance boss Bev Dew had admitted to the chair of the business select committee, Rachel Reeves, that the contractor takes an average of 55 days to pay subcontractors on public sector jobs – despite a requirement to pay all undisputed invoices within 30 days.

Trickett also asked for details of discussions between Kier and the Cabinet Office about the contractor's financial situation.

Kier said its cost-cutting programme, which also includes selling off a host of businesses including its residential arm, will save £55m a year from 2021.

Chief executive Andrew Davies (pictured) said: “These actions are focused on resetting the operational structure of Kier, simplifying the portfolio and emphasising cash generation in order to structurally reduce debt.”

Announcing the results of his strategic review a week ago, Davies said Kier's net debt levels have risen again for the financial year to an average month end net debt of £420m-£450m. Kier is due to announce its annual results on 19 September.

Building asked the Cabinet Office for a comment following news of the job losses but did not get a response.

But in a response to Kier’s payment record in the public sector, the Cabinet Office said: “The government regards developing a prompt payment culture as critical for all companies helping to deliver public services.”

The government has told a host of firms who work for it that from September if they are late with supplier payments they could be barred from winning public sector jobs in the future.