Following the wall to wall coverage of G4S’ Olympics security ‘shambles’ over the weekend and late last week (see G4S under the cosh over Olympics security), the support services giant has said it will now incur a charge of between £35m and £50m in the current financial year as it grapples to resolve the crisis of its own making. Investors are now beginning to see the wider impact this is having on G4S. Its shares fell 7%.
What isn’t clear from the statement is how much, if any, of this charge is for penalties imposed by Government for G4S’ failure to deliver against its contractual obligations. CE Nick Buckles is reported saying that the penalty costs will be in the region of £10m to £20m - this would amount to between 4% and 7% of the contract’s £284m value to G4S. But this is likely to be in addition to these operational costs as G4S works ‘flat out around the clock to resolve the situation’.
This high profile mess has really damaged the reputation of G4S with UK Government. Unfortunately the longer this drags on, the more danger there is it could have a serious impact on public sector outsourcing in general.