Whitehall taps Deloitte to monitor troubled outsourcer Interserve

The 'big four' accountancy firm frozen out of Whitehall over a Brexit row last year has been drafted in by ministers to advise on public sector contracts held by Interserve (Frankfurt: 860509 - news) , the troubled outsourcer.

Sky News has learnt that Deloitte has been engaged by the Cabinet Office to review the Government's exposure to Interserve, which is engaged in talks with its lenders aimed at providing long-term support to its balance sheet.

The appointment of Deloitte comes just months after the firm resumed bidding for central Government contracts, and at a time when the 'big four' audit firms are facing intense scrutiny over their work for major outsourcers.

Last month's collapse of Carillion (Frankfurt: 924047 - news) , the construction group, prompted MPs (BSE: MPSLTD.BO - news) on two select committees to demand answers from Deloitte and its rivals about their work for the company during the last decade.

The responses from Deloitte, EY, Carillion's auditor KPMG and PricewaterhouseCoopers are expected to be published this week.

Ministers' decision to turn to Deloitte on Interserve, which manages the Ministry of Defence's training base on Salisbury Plain, is likely to attract fresh scrutiny over their reliance on the 'big four' firms.

Last week, David Lidington, Minister for the Cabinet Office, said he would require "compelling evidence" to add his voice to calls for the quartet to be broken up.

Interserve works on major construction and renovation projects, and is one of the UK's biggest private sector employers, with an 80,000-strong workforce.

The company, which also provides support to UK armed forces in Cyprus, Gibraltar and the Falkland Islands, was plunged into crisis in the autumn when it blamed economic uncertainty and weak Government spending for a massive profit warning.

EY is already acting for Interserve's lenders, while PwC is advising the company.

Grant Thornton acts as auditor to Interserve, which has seen its shares slump by more than 75% over the last 12 months, leaving it with a market value of just £109m.

A Government spokesperson said: "We regularly meet with all of our suppliers to ensure the efficient delivery of public services.

"We do not believe that any of our strategic suppliers are in a comparable position to Carillion."

Interserve recently parachuted in a company doctor following talks with banks about a £180m funding lifeline.

The company's new chief executive, Debbie White, said the new financing put the company "on a firmer footing".

"Whilst there is still much to do, Interserve has significant opportunities based upon a strong client base and our dedicated employees," she said.

"There is considerable potential for business improvement across the group.

"These short-term committed borrowing facilities, together with the ongoing work to clearly define the strategy and commercial structure for the business going forward, will bring further stability and clarity for our clients, our people and our shareholders."

Scott Millar, a managing director at AlixPartners, joined Interserve several weeks ago in the role of chief restructuring officer.

The Financial Times reported at the weekend that Interserve had met its lending syndicate in recent days to discuss a revised funding plan.

The Cabinet Office declined to comment on the appointment of Deloitte, which also refused to comment.

Deloitte only restarted tendering for new work from Whitehall departments in July following a six-month purdah period triggered by a memo about Brexit which had been written by one of the firm's consultants.

The memo, which had not been commissioned by the Government, sparked fury in Downing Street after it referred to a lack of Government preparation and "divisions with the Cabinet" over the Government's Brexit priorities.