Interserve, a rival of Carillion until its financial collapse this week, has seen its share price fall sharply on a report the Government is closely monitoring the company.
Stock was down as much as 15% in early trading on the London Stock Exchange after the Financial Times said a small team had been put together to keep an eye on the outsourcing specialist’s financial health.
A Government official was said to have told the paper that ministers were “very worried”.
However, shares later recovered some poise – down 1.5% – after the Cabinet Office released a statement.
Image: Interserve’s work includes managing the MOD’s training base on Salisbury Plain
A spokesperson told Sky News: “We monitor the financial health of all of our strategic suppliers, including Interserve.
“We are in regular discussions with all these companies regarding their financial position. We do not believe that any of our strategic suppliers are in a comparable position to Carillion.”
Carillion went bust on Monday carrying more than £2.2bn of financial liabilities, according to a filing by its interim chief executive Keith Cochrane, who also revealed it had just £29m in the bank at the time of its demise.
Interserve, like the Government, sought to distance itself from the collapse of Carillion.
A company spokesperson said: “Last week we announced that we expect our 2017 performance to be in line with expectations outlined in October and that our transformation plan is expected to deliver £40m-£50m benefit by 2020.
Image: Debbie White took over as chief executive of Interserve in September 2017
“This remains the case and we expect our 2018 operating profit to be ahead of current market expectations and we continue to have constructive discussions with lenders over longer-term funding.
“We are keeping the Cabinet Office closely appraised of our progress as would be expected.”
Labour maintained its pressure on ministers over the issue of private firms running work in the public sector.
Shadow Cabinet Office minister Jon Trickett said: “The Government awarded Interserve numerous contracts after significant profit warnings, clearly showing us that Carillion was not an isolated case.
“The Tory Government is wedded to a dogma which would rather see public services in private hands, so their shareholders cream off the profits and the British people pick up the bill.
Image: Jon Trickett does not believe the taxpayer is getting value for money through public sector contracts
“Even when these huge firms are in unstable positions, the Government would rather risk our services than actually run them for the public.
“The time is up on the few profiteering at the expense of the many.”
Interserve, which has around 80,000 staff worldwide – 25,000 of them in the UK – saw its chief executive quit in the last year ahead of a profit warning last September which left shares losing more than half their value.
It blamed high costs from its exit from the waste-to-energy sector and tough trading in its construction and business services arms.
The company later announced in December that it had secured new funding until the end of March to put its finances on a “firmer footing”.
It first raised its profit guidance a week ago.
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Commenting on the share price movements Neil Wilson, senior market analyst at ETX Capital, said: “Interserve has hadits problems for sure, but it’s no Carillion.
“Its latest update showed improvement and the news will do no good for sentiment given there may be some twitchiness among investors in the sector following Carillion’s collapse.”