This article looking at the charity Migrant Help, is the first in a series of reports examining the corporate interests behind organisations working with refugees and people seeking asylum. We interviewed people working with refugees who had frequent contact with the organisation. We found that:

• Migrant Help has a multi-million pound contract with the Home Office to provide a phone line for people seeking asylum. The service is the primary route for people seeking asylum to gain information or support for all their needs.
• The phone line has been plagued with problems since at least 2015, with callers enduring long waiting times or unanswered calls.
• In fact, it’s struggling so much that it is now subcontracting this phone service out.
• As middlemen between people seeking asylum and the Home Office, asylum accommodation providers or other agencies, it is frequently unclear where the responsibility for problems lands.

‘Migrant (No) Help’

The Migrant Help website gives the impression that they care for and support “people affected by displacement and exploitation”. A prominent donate button navigates you easily to give money to “change someone’s life”. But this refugee charity is not all it seems. As a person working on the front line with refugees told Corporate Watch:

Migrant Help are the ‘bouncers’ of the opaque and Kafka-esque asylum support system. They have a friendly veneer but there are enormous issues with accessibility and delivering on the contract. Phones are not answered. Contact emails are frequently changed at short notice. Escalated emails are not acknowledged.

Migrant Help, formerly Migrant Helpline, is one of the Home Office’s key contractors and the sole official provider of advice and support for people seeking asylum. It is both a charity and a company. It claims to be able to offer telephone advice and support to people seeking asylum on basically any issue. These include navigating the asylum process; applying for asylum support and accommodation; finding a lawyer; accessing healthcare; problems with asylum accommodation (it claims it will liaise with accommodation providers to address issues); welfare issues such as neglect or domestic violence; and asylum benefits payments problems.

People seeking asylum have little choice but to use the Migrant Help phone line because it’s provided through Home Office funding. As some working on the front line explained, the Migrant Help phone service is the only option most people seeking asylum have to ask for help or to report issues, and this creates huge problems.

A one-stop shop might sound like an efficient way to run things. But that approach only works when the service is of the highest quality. If that provider is at the centre of countless stories of unprofessional service, failure to fulfil its duties and abandoning people in its care, the situation becomes disastrous, with a population seeking asylum forced into near dependency on a phone line that so often fails to get answered.

Migrant Help isn’t struggling for money. In 2021, the charity’s total income was over £22 million; £20.46 million of this came from four “government contracts”. These aren’t just any government contracts. They’re all directly from the Home Office. The very same department that hasn’t let up on making life as difficult as possible for refugees and people seeking asylum. It is perhaps no coincidence then that despite receiving millions in Home Office funding, Migrant Help has so often failed to deliver and has consistently let down the vulnerable people it is directly funded to help.

Money, money, money

A look at previous accounts shows that Migrant Help’s income has been steadily increasing since 2017 when it received just over £8 million from government contracts and grants. The contracts increased year on year to £15.12 million by 2020 with another huge leap in 2021.

The charity has received “significant” Home Office funding since 1994. By 2019, it secured a £100 million contract to run the Home Office system called “Advice, Issue Reporting and Eligibility (AIRE)” services, and act as the official point of contact for refugees to get advice on their asylum claims. This was part of a £4 billion award for Asylum Accommodation and Support Services Contracts (AASC) working alongside Mears, Clearsprings and Serco which were tasked with providing asylum seeker accommodation in the UK. By 2021, the Migrant Help contract rose to £235 million, perhaps because the initial four-year contract appears to have been extended to ten; it will end in 2029. This contract pays well for some at the charity. At least one person earns between £120,000 – £130,000 and two people earn £70,000 to £80,000. Meanwhile, the Home Office allocates people seeking asylum £40.85 per week.

Migrant Help financial history graph sourced from Charity Commission.

The AIRE advice contract also involves advising refugees on what to do if their claims are refused. That specifically includes telling them about “the support available to return to their country of origin.” The Home Office has long had a strategy of pushing people to leave through so-called “voluntary” return, and saw Migrant Help as playing an important role in meeting its “removal” targets.

The multi-million-pound contract might suggest that Migrant Help was providing an effective service for the Home Office and actively helping refugees and people seeking asylum. Yet, evidence shows this just isn’t true. Complaints go back to 2015 when Migrant Help was “slammed for leaving refugees destitute”. And it hasn’t stopped.

“Gatekeepers and the face of the hostile environment”

Photo by Ahmed Nishaath on Unsplash

We’re now used to pretty much every service we use having a phone helpline. And we’ve all been there, waiting on the phone for hours while we try to speak to our bank or ‘service provider’. But imagine you’re new to the country, and that ‘service provider’ is responsible for dealing with all major problems: your health, your housing, your money. And imagine how it must feel when that phone line takes hours to answer, or the person who finally picks it up can’t or won’t help resolve your issue. That’s the situation people are forced into because the Migrant Help phone line is their only point of access.

The head of operations with a front-line refugee support charity told Corporate Watch that Migrant Help “are the gatekeepers and the face of the hostile environment. It is a well-known joke that their name should be Migrant no Help”.

And that’s not surprising, because from the quality of the service provided to logged cases of financial precarity and even destitution, the catalogue of evidence against Migrant Help’s ‘support’ is damning:

• In 2017, the Red Cross criticised Migrant Help claiming that since it took on the role of giving Home Office advice to refugees, the situation became “untenable”, with more people being left destitute. In particular, it challenged the decision to replace face-to-face meetings with telephone support.
• A 2020 report from Institute of Race Relations called the AIRE contract “a disaster” and criticised both Migrant Help and housing group Mears. An open letter from over 100 charities ‘warned that the new repairs reporting and advice system was causing “needless suffering among those it is meant to protect”’.
• A 2021 report from the All-Party Immigration Detention Group detailed problems with the Migrant Help phone service endured by refugees in the notorious Penally and Napier detention centres.
• In 2021, problems getting through to the Migrant Help phone line contributed to thousands of refugees being left without access to food or money. The Home office gives people seeking asylum £40.85 per week on Aspen cash cards, but the system totally broke down, with cards not arriving or failing to work. Yet again, the only ‘help’ available was via the Migrant Help phone line. People seeking asylum don’t have access to bank accounts, aren’t allowed to work and rarely have networks of family or friends able to lend cash, so days of delays where Migrant Help doesn’t answer phone calls cause acute hardship and hunger.
• People seeking asylum have been unable to report issues with inadequate housing to Migrant Help. According to the BBC, the Home Office refused to answer Freedom of Information (FOI) requests from refugee charities “about the severity and frequency of complaints, and about how Migrant Help was performing”.
• One successful FOI request revealed that between Sept 2019 to Sept 2021 there were 517 logged complaints against Migrant Help.
• In April 2022 a Home Office report (released through an FoI) implicated Mears, Migrant Help and the Home Office in a crisis for Badreddin Abdalla Adam that ultimately led to him stabbing six people. He’d tried to make contact with Migrant Help for support with his health and accommodation 72 times in the period leading up to the stabbings.

Evidence shared with Corporate Watch echoes these issues are ongoing. Our contact told us that a caseworker asked if Migrant Help could issue a “hardship payment” to someone who’d had no money for several months: “I’ve escalated to Migrant Help and they say it is being investigated. But when I ask, there is no time frame for an answer.”

“People are sick of complaining,’ one hotel resident in the asylum process reportedly said, “because they feel it makes no difference. And you have to complain to Migrant Help”. Someone working with urgent asylum cases reported waiting four hours on the phone before eventually being told by Migrant Help that the issue needed to “’be escalated’, and so they just put me on hold again for another hour”. Meanwhile, a volunteer reported trying to support someone who was homeless and had already waited three days to get into accommodation but reportedly:

When he called Migrant help they had him on hold for 45 mins and then it cut off. His battery went dead and he had to find somewhere to charge his phone and try again to be told there was no update.

Many people seeking asylum don’t have the support of organisations that can escalate things on their behalf. Our contact also explained:

As the unique route to navigate to asylum support, to prevent destitution, people seeking asylum have literally no choice. Even organisations with specialist advisors working in this area still have to go through Migrant Help. Behind the Migrant Help contract, there are the accommodation providers… They then subcontract to security firms, but there is very little accountability. Supposedly people with complex needs such as those with mental illness, survivors of trafficking or with disabilities are given outreach support but this rarely or ever happens in my experience. Partly because trust in the organisation is so low.

The source also explained that in theory, “voluntary sector groups can apply to be commissioned and claim back money for work they do that Migrant Help should deliver”. However, “partly due to reputational risk of not wanting to be associated with Migrant Help” groups are said to frequently deliver the work themselves. But that work is difficult to fund, since the Home Office’s funding to Migrant Help is expected to cover it. This produces “over-stretched charities relying on volunteers, grassroots groups and communities to mitigate the worst impact” of Home Office failures to support people seeking asylum.

Not only is Migrant Help’s near monopoly just not working, but the organisation itself now seems to be subcontracting its duties to run the phone line, in a 3-year tender worth £1.5 million.

A dangerous blame game

The nature of the relationship between the Home Office, Migrant Help and other outsourcing giants such as Mears, Clearsprings and Serco creates additional layers of hardship both for people seeking asylum and those working at a grassroots level to provide support because accountability becomes nearly impossible. Our source told Corporate Watch:

When things don’t happen – such as people not getting the £8 per week cash support they are entitled to when living in hotels for six months; or repairs to houses that are unsafe for disabled children – it’s unclear whether fault lies with Migrant Help, the accommodation provider, the subcontractor, or the Home Office themselves. They all hide behind and blame each other and no one takes responsibility.

Given the litany of complaints against Migrant Help, it’s difficult to comprehend quite how it secured such a huge contract. Since being awarded the multi-million-pound deal, it has still failed to deliver. In fact, a 2020 investigation from the National Audit Office prompted a parliamentary report which scrutinised the Home Office AIRE contract allocation and Migrant Help’s performance.

The parliamentary report summarised that:

• The Home Office admitted faults in issuing AIRE contracts, including that the process was rushed.
• Home Office data showed that on average, calls for support historically took between 12 and 17 minutes. Yet the winning Migrant Help bid was based on a far shorter call length of four minutes on average. When it took up the contract, it was perhaps inevitably then only able to answer a fraction of the calls received between September 2019 and January 2020 (one-fifth, to be precise). The report also notes that the charity Asylum Matters sent written evidence stating “that many asylum seekers and their caseworkers had lost confidence in AIRE and simply stopped calling”.
• There was a lack of scrutiny for very large tenders issued by the Home Office, coupled with a lack of transparency.

The report also criticised the Home Office for issuing many of the AIRE contracts to the sole bidder.

According to the NAO report, Migrant Help promised that it had recruited more people and that the service had improved. The report claimed that in 2020, the charity ”answered 94% of calls within 60 seconds. However, callers are still facing long delays in being transferred to a specialist adviser when required”. And as ongoing media accounts and information given to Corporate Watch reveal, there are still huge problems for people trying to access support.

In safe hands?

Migrant Help’s 2021 trustee report claims that Migrant Help “assisted clients in reporting any issues with the accommodation”. Yet the previous year, Helen Bransfield, Migrant Help director of asylum services, offered little challenge when news broke about the appalling conditions for asylum seekers housed in the near-derelict Napier army barracks in Kent. This doesn’t quite tally with the horrific reports about conditions at Napier reported by refugees and local volunteers. Migrant Help wasn’t responsible for providing this sub-standard accommodation. However, it’s not clear whether the accommodation providers – Mears and Clearsprings – failed to act on the complaints; or whether Migrant Help failed to report them – or both. But there’s no doubt that the lack of transparency hinders accountability, leaving many people seeking asylum in a dire situation.

Meanwhile, Migrant Help’s near monopoly on asylum advice has severe implications for the quality of service. Put simply, there is little motivation to do a good job, particularly when the government’s policy is to make life as difficult as possible for refugees. The trustee report also notes that Migrant Help was “concerned about the reputational damage” and “considerable negative press coverage” about conditions at Penally and Napier. Yet It makes no mention of the people forced to live there. Migrant Help reported two other “serious incidents” to the charity commission in 2021-2021.

There also seems to be a revolving door linking some in the Migrant Help management team with other Home Office AASC providers. Juliet Halstead, Migrant Help’s deputy director of asylum services, spent a year working for Mears. She’s listed as head of housing for G4S under the Home Office Compass contract (which predates AIRE) between 2012 and 2019. G4S is the notorious security firm which ran multiple UK detention centres and supplied guards to carry out deportations; its history is embroiled in violence against migrants. Halstead joined the company at a time when it was facing intense scrutiny following the 2010 death of deportee Jimmy Mubenga. And while she worked there, G4S guards were secretly filmed throttling detainees at Brook House detention centre. Halstead was also at G4S when it subcontracted Jomast (run by Stuart Monk) to provide asylum seeker housing. During this time, Jomast painted the doors of refugee houses red which led to ongoing racist attacks. At the time, G4S “repeatedly denied” being aware of any complaints about this until the story broke in the national media.

Meanwhile, Andrew Billany, a former CEO of Migrant Help is now a trustee and director for criminal justice charity Nacro. Nacro was previously linked to G4S when it entered a bid to build and help run two prisons in Merseyside.

Systemic Failure

Migrant Help seems inextricably linked to the failures of the accommodation providers who share in this £4 billion deal. It’s impossible for asylum seekers and refugees, or those working on the front line to support them, to access any real help without going through this charity. From leaving vulnerable people waiting hours to even hear a voice at the end of a phone, to actively propping up the hostile environment by pushing voluntary return, Migrant Help is simply a cog in the ongoing racist cruelty against refugees.

If you want to help people seeking asylum, please avoid the Migrant Help ‘donate’ button. Instead of giving to Migrant Help, support grassroots initiatives providing direct support such as:

• Right to Remain provides multilingual information to empower people seeking asylum.
• Local groups around the UK such as Manchester Refugee Support Network or Bristol Refugee Rights which offer direct support for people going through the asylum system.
• Asylum Matters working locally and nationally to improve the lives of refugees and people seeking asylum through social and political change.
• Refugee Community Kitchen which provides meals for displaced people in the UK and France.

———–

Correction:

This article was corrected on 16 August. We incorrectly stated that Jimmy Mubenga’s death occurred during Juliet Halstead’s tenure at G4S. We have since been made aware that Halstead joined G4S two years after the death of Jimmy Mubenga and was not working there when it occurred. We have amended the article to clarify this.

The post Migrant ‘No’ Help: the Home Office’s charity gatekeeper appeared first on Corporate Watch.

In the last year, refugee and housing campaigners have been keeping a close eye on Mears, with local resistance to its slum landlord practices emerging across the UK. This report just gives a quick update on some recent news on the company.

Unless you live in one of the properties it manages, you may well not have heard of Mears. But it has quietly built up a small empire across the UK, primarily by taking over privatised housing services from local councils. Along the way it’s already clocked up a list of scandals from Glasgow down to Brighton, involving accusations of local government corruption and numerous alleged overcharging scams.

The death of Adnan Olbeh

Adnan Olbeh was found dead on 5 May 2020 in a Glasgow hotel where he had been placed by Mears Group under its management of the UK’s “asylum dispersal” scheme. He was 30 years old, from Syria. The cause of death is unclear, with any postmortem examination delayed by the corona crisis.

What is known is that Adnan was one of hundreds of refugees recently evicted from their flats by Mears and other asylum landlords.

The mass evictions were part of the Home Office’s coronavirus strategy. Often with just an hour’s notice, people were told to pack and leave their flats and moved into hotels. The logic behind this is not entirely clear, but it seems in line with other aspects of the government’s shambolic covid-19 response. “Social distancing” measures included people being transported four or five to a small van, stripped of cash support and facilities to cook for themselves, and instead being made to eat close together in hotel canteens — with food including the likes of undercooked chicken and mouldy bread.

According to Smina Akhtar, interviewed by John Grayson for the Institute for Race Relations:

“We have had lots of reports from people in the hotels about really awful food and poor conditions there. Adnan’s friend told me that his mental health really deteriorated in the hotel. A week before he died his friend asked the hotel to call an emergency ambulance because Adnan was in a terrible state. His friend went with him to the hospital but said that the staff there did nothing, they offered him no medication, and sent him back to his hotel.”

According to Mears, in evidence to the House of Commons Home Affairs select committee, it was acting on a directive from the Home Office.

Mears’ Home Office contracts so far

Adnan Olbeh’s death is one visible tragedy linked to the misery of the UK asylum system. Thousands more people live with the everyday effects of a housing system which “disperses” people into run-down slum housing in the country’s most impoverished communities.

For Mears, this means a ten year profit stream. For Mears’ new tenants – rat infestations, broken boilers, collapsed ceilings, piles of rubbish, and environmental hazards of all kinds seem the norm.

John Grayson of South Yorkshire Asylum Action Group (Symaag) has been documenting the “chaotic” and “failed” Mears contract in Yorkshire. In the past he reported on similar conditions under the last contract holder, G4S.

So have Mears even managed to underperform the shambles of G4S’ housing management? It’s maybe too early to make a full comparison. But it doesn’t look like things have got off to a good start.

G4S and others had complained bitterly about making losses on the former round of asylum housing contracts. To drive profits up, Mears started their own tenure by trying to slash the amounts they pay to the smaller landlords they rent from. In South Yorkshire, Mears offered landlords new contracts paying up to 20% less than G4S had done. Many refused to sign up in what John Grayson calls a “virtual landlords strike” which left Mears struggling to place the asylum seekers it was contracted to house.

In the North East, Mears had similar problems negotiating with G4S’ main sub-contractor Jomast – development company headed by Teesside multi-millionaire Stuart Monk. According to Grayson, this left over 1000 people stuck in hotels across West Yorkshire and Humberside in Wakefield’s “Urban House” temporary asylum accommodation over the winter. And, as he explained to us, the problem is by no means solved.

“When Covid-19 arrived the whole asylum housing system was frozen in the Mears contract areas with around 400 people still in hotels and 270 in Urban House. Many people have now spent four months in Urban House, when they are only meant to stay there a few weeks. Urban House has appalling conditions which have been extensively documented in pictures and videos sent out from people resisting inside.”

One thing Mears has achieved in Yorkshire is provoking a major local authority to come out against the contract. In January, as well as launching inspections of 240 Mears properties, Sheffield Council called on the Home Office to terminate the Mears contract and transfer asylum housing in the city directly to the council. This is only really a token gesture – the council has no say in national asylum policy. But it could be one move in a shift against the outsourced asylum housing system, if followed up elsewhere in the country.

In Scotland, there is a strong solidarity network in support of refugee housing rights – including the Glasgow No Evictions campaign and groups such as the Unity Centre, Living Rent tenants union, and charity Positive Action in Housing. The main rallying point in 2019 was previous contractor Serco’s threatened “lock change evictions” of 300 of its tenants. Well aware of the opposition, Mears has so far tried to tread more carefully. It has promised not to carry out similar evictions, and set up a so-called “independent scrutiny board” to deflect criticism.

In the North of Ireland, the PPR Project is one association monitoring and exposing conditions in Mears’ housing there.

Milton Keynes mystery

Before it turned asylum landlord, Mears’ big profit hope was getting more involved in the very lucrative business of housing development. One of its potential jackpots was a 50/50 joint venture with Milton Keynes council to redevelop seven major estates. The deal was valued at £1 billion, and branded as “YourMK”.

But as of last year, the scheme was dead in the water. In July 2018, the council said it was putting the regeneration deal “on hold”. In October 2018, whistleblower allegations emerged that Mears had been overcharging Milton Keynes for repairs by up to £80,000 a month, with overall some £15 million “unaccounted for”. When we looked at Mears last February, the YourMK website had gone dead, with a page announcing that further information would be coming soon.

The MK scandal still seems to be quietly brewing. In July 2019, the MK Citizen reported first of all that the regeneration scheme was definitively “scrapped”. But a couple of weeks later a second Citizen report corrected that YourMK was “not dead but dormant”, with the council and Mears “in discussions about whether it will remain the right partnership structure in future”.

In May 2020, we haven’t seen any new announcements. The YourMK website is still down, and there is no official word on that supposedly missing 15 million. Where are the budding investigative journalists of Milton Keynes to get to the bottom of this?

Booted out of Brighton

Mears’ ten year housing maintenance contract with Brighton and Hove council finally came to an end on 31 May. Again, customer complaints came together with whistleblower revelations – and, yet again, the apparent disappearance of large sums of money.

A council investigation found it had been overcharged by £500,000 by a plastering subcontractor hired by Mears. A second investigation was later opened into overcharging for electrical work.

Mears will not be missed in Brighton. And just before they left, in February 2020 their workers were balloting for strike action over pay and Mears’ plan to combine holiday and sick pay.

Newham: Mears Cats

In East London, Mears run 250 homes which are set for demolition as part of Newham Council’s “Regeneration Zone” in Canning Town and Custom House, E16.

Like Milton Keynes, this is another overlong saga of a failing regeneration project leaving people stuck in poor housing. Back in 2011, Newham handed the properties to a private management company called Omega to let out on short term commercial tenancies. This was supposed to be a “temporary” arrangement before the bulldozers came in. Mears bought out the contract in 2014, and six years later are still in place. While the buildings are still owned by the council, Mears collect the rent and do the repairs – in theory.

In reality, Custom House tenants speak of conditions that would be very familiar to anyone in Mears’ asylum accommodation in Sheffield or Glasgow. Months overdue repairs, water leaks, exposed asbestos, rat infestations and a “war” to get anything done – all whilst paying average rents twice as high as in directly run Newham council properties.

Tenants have set up a vocal campaign group called Mears Cats, part of the Peoples Empowerment Alliance of Custom House, pushing to get their repairs done and for Newham Council to take direct responsibility. Boglarka Filler, one of the Mears Cats, told Corporate Watch:

“Schemes such as the partnership between Mears and Newham Council have brought further misery to people already on the receiving end of austerity and insecure employment. Mears Cats are campaigning for better quality, cheaper housing for Mears tenants struggling to cope with disrepair and debts caused by high rents. We will take action to ensure that the Mears contract will not be renewed in Newham when it runs out in 2021, and that we get a fair deal next time.”

Steady profits, feisty shareholders

On a business front, Mears continues to turn a decent profit and pay out to its shareholders. Its last year (2018) annual results clocked operating profits up 4.7% (though revenue was 3% down), and shareholders pocketed a dividend up 3% on the year before.

Mears has kept up its strategy of honing in on its “core” housing maintenance business. After buying up Mitie’s property division last year, it sold off its own home care wing.

Most recently, Mears has said that it only expects a modest impact from the covid crisis. Housing is what is called “non-discretionary” spending – unlike foreign holidays or consumer fads, there is still demand for essential repairs in a downturn. The bulk of Mears’ income is locked in from long term contracts, largely with the public sector. As the company explained, 90% of its order book comes from public bodies and “the government has made a clear commitment that invoices will be settled quickly”.

Through the lockdown, Mears has said it is only carrying out only emergency repairs. Although workers complain they are still being sent on unnecessary jobs without “social distancing” in place, or called in just to sit in company offices.

Less positive for management, there are new rumbles from rebellious shareholders. Back in 2018 one of the two biggest shareholders, a German investment manager called Shareholder Value Management (SVM) successfully pushed out the company’s long-term chairman. At the latest AGM in June 2019, the other big investor also threw its weight around.

PrimeStone Capital, a Mayfair based investor which owns over 13% of Mears’ shares, tried to get two new nominees on the board of directors against management’s wishes. The shareholder rebellion was narrowly defeated. In a statement, PrimeStone explained it was unhappy that “the company’s revenues and profit have remained flat despite its strong market position and growth prospects [while] average net debt has doubled”.

It argued that:

“Mears’ underperformance is predominantly due to a lack of strategic, commercial and financial experience on the board. The current board has a strong concentration of directors with a background in social housing, health & safety and charities.”

Mears’ profit-hungry management guarantee shareholder payoffs by squeezing their repair costs to the bone. The outcome is the lived experience of their tenants across the UK. But, for some shareholders, they’re still not doing enough.

Students and shirts

Despite its well documented failings, Mears continues to win new contracts – for example, a new housing development project in North Lanarkshire, and a housing maintenance and repairs contract with Crawley council.

Another sideline is its student housing offshoot Mears Student Life, so far with just two complexes in Dundee and Salford.

Mears also likes a bit of football. In May 2019 the League One side Rotherham United confirmed it had extended its contract to emblazon the company’s classy red and black logo on its away kits for the 2019/20 season.

The post Mears Group 2020 update: scandal-ridden landlord under fire from Glasgow to Gloucester appeared first on Corporate Watch.

Mears is an outsourcing company working in two sectors: housing management, and home care. It has recently won the £1.15 billion Home Office contract to provide asylum seeker housing in Scotland, Northern Ireland, Yorkshire and the North East of England.

So what sort of company is Mears? Corporate Watch has looked into Mears’ past record to find how the “strong sense of social responsibility” its promotional materials boast plays out in practice.

Mears presents itself as a step up from notorious outsourcing rivals like Serco and G4S. But it is far from certain the company can be trusted to provide decent homes for refugees.

• Mears is being hit by multiple scandals. Its flagship regeneration contract in Milton Keynes may be collapsing amid allegations of overcharging for repairs, while it has recently been dropped from a big repairs deal on its home turf of Gloucestershire. Allegations involving overcharging scams and corruption hang over deals from Brighton and Scotland. Most shocking of all: in 2017 Mears tried to ban beards.
• The Mears home care business struggles to break even and to keep care workers, unsurprising given the infamously low rates of pay in the sector. Over 40% of Mears’ care workers left the company last year.
• Meanwhile, Mears’ top brass receive handsome rewards. The company paid out £52 million out to its shareholders over the last five years, while CEO David Miles made £443,000 last year — over 20 times the average wage for Mears workers.
• While profits and payouts remain healthy, Mears’ financial profile shares many similarities with those of troubled outsourcing firms such as Interserve and Carillion, with potentially few resources to fall back on if contracts are lost or government spending is cut further.
• Mears’ current Chief Operating Officer, John Taylor, was previously boss of scandal-hit housing company Orchard & Shipman — when that company won the bid to run much of the previous Scottish asylum housing contract under Serco.
• To keep growing, Mears is expanding into new business lines, such as building its own housing developments and running its own regeneration schemes. It also manages the National Planning Portal, which processes most of the UK’s planning applications, and last year it bought rival outsourcer Mitie’s social housing division. In January 2019 Mears won its biggest deal yet —  £1.15 billion worth of asylum housing contracts with the Home Office.

Do you have information about Mears you’d like to share with us? Click here to get in touch.

Main picture: a Mears sponsored networking event with senior council and housing association managers.

Click on the heading below to go straight to a section:

• History: council housing profiteer
• Housing
• £1.15 billion Asylum Housing Contract
• “Blurring the boundaries between private and social”
• National Planning Portal
• Home care
• Scandals: Milton Keynes regeneration, Brighton overcharging, Scottish corruption allegations, Stroud repairs, Apprenticeships, Industrial disputes, Beards
• Company people
• Shareholders
• Finances

Mears is one of the UK’s biggest maintenance and repairs contractors, working on over 650,000 homes for councils and housing associations. Mears home care division provides care to 15,000 older and disabled people.

The company employs 12,000 people. It is based in Gloucestershire, but works all over the UK.

Mears’ shared are listed on the London Stock Exchange. Its businesses bring in around £900 million a year.

History: local privatisation profiteer

Like G4S, Serco, Capita and other well-known “outsourcing” corporations, Mears Group has grown from the ongoing privatisation of public services. But whereas G4S or Capita have profited from the sell-off of national services, Mears has thrived in the smaller and less visible world of local government privatisation.

Until the 1980s, “social housing” was very largely the responsibility of elected Local Authorities. Council housing was not just owned and managed by Local Authorities, but maintained and repaired by local in-house teams. These “Direct Labour Organisations” (DLOs) made no profit and recruited and trained people to maintain the housing stock.

This model of local public provision was attacked by Conservative and Labour governments from the 1980s on. Legal changes and budget controls pushed the privatisation of council housing in a number of ways, including “Right to Buy” sales and the mass stock transfer of around 1.9 million homes from councils to housing associations. Another was pushing councils to contract out repairs and other services to the private sector.

This included “compulsory tendering” rules that forced authorities to hire low-cost contractors who undercut their in-house teams. More broadly, it involved a spreading ideology of privatisation: repeating the mantra that private companies were more “efficient” at running services. Of course, this personally benefited many local politicians and managers who moved into well-paid private sector jobs.

As many authorities closed or sold off their DLO maintenance departments, the winners were contractors like Mears.

Housing

Mears’ housing business falls under three headings: maintenance, management, and development.

The bread and butter business is winning council and housing association contracts for maintenance and repair work.

According to its latest annual report, Mears works on “over 14% – over 650,000 – of the social homes in the UK”. In some cases, for example in Manchester or North Lanarkshire, Mears works through joint venture companies set up together with local authorities. This division still makes up over three quarters of Mears’ housing business.

But maintenance margins are tight. The business model is based on trying to undercut councils’ and social landlords’ “in house” services; and there is competition from several big national rivals, as well as smaller local companies. In a June 2018 presentation, Mears identified four major housing maintenance competitors: Wates, Fortem, Kier (click here for our profile of them), and Mitie Property Maintenance, which it has since bought.

To increase margins, Mears is trying to break out into wider “management” roles. So far, Mears has overall management responsibility for some 10,000 properties. Almost 3,000 of these are run by Mears’ two “non-profit” subsidiaries Omega and Plexus (see section below). Mears also offers a range of management services to other landlords, such as “income management” (i.e., rent collection), and “emergency accommodation”.

Mears also sees the overlap between its housing and care businesses as a good selling point – looking to capitalise on an ageing population. Its “housing with care” schemes involve running sheltered housing with carers on call.

Finally, Mears has also started to develop and build houses itself, particularly as part of regeneration schemes. The Mears New Homes division was set up in 2014.

A related business line is “property acquisition funding”. Mears buys up properties, does them up and sells them on to “a long-term funding partner”, perhaps after a few months. It has set up a £30 million fund for this sideline.

To describe its new business approach overall, Mears likes to use a current regeneration buzzword – “Placemaking”. It explained what this means in a June 2018 investor presentation.

According to this document, Mears’ approach combines maintenance, housing management and “asset management” in deals that are “bigger and more complex”, with “potential for higher margin” and “some opportunities secured outside competitive process” (we are not exactly sure what that last phrase means).

Placemaking also involves: “blurring of the boundaries around social, affordable and private rented housing”. We will discuss this point further below.

Mitie buy-out

Through the years, Mears has grown steadily by picking up outsourcing contracts from both councils and housing associations, taking over former DLOs and buying out competing maintenance businesses.

Its biggest acquisition yet was announced in November 2018. Mears agreed to buy Mitie Property Management, the social housing management wing of outsourcer and detention profiteer Mitie, for £35 million. (See our 2018 company profile of Mitie here.) Mitie Property Management has over 1,000 staff and contracts with more than 30 landlords, bringing in annual revenues of £138 million.

However, Mitie Property Management has been one of the worst performing parts of Mitie’s business, which the company has been looking to get rid of for some time (click here to read more in our 2018 Mitie company profile). But for Mears, this will mean taking one of its main competitors out of the game.

Image: Glasgow asylum housing run by previous sub-contractor Orchard & Shipman, whose old CEO now works at Mears.

Big government deals – the Asylum Housing contract

In an investor briefing last year, Mears’ management said they had decided to turn their focus to bigger deals, particularly from central government: “Evolution of business means we are gaining access to opportunities previously out of our reach.”

In particular, Mears worked on two big government tenders in 2018. One, now in the bag, covers major Home Office asylum housing contracts for Scotland, Northern Ireland, and North East England, Yorkshire and the Humber. Together they are worth £1.15 billion over ten years.

These contracts involve providing housing for thousands of asylum seekers who have been “dispersed” to those areas by the Home Office while they apply for refugee status. In practice, the accommodation is rented from a wide range of housing associations and smaller private landlords, with Mears acting as the overall manager.

This is the first time Mears has worked as a refugee landlord. In Scotland, Mears takes over from the previous manager, Serco, after a strong local campaign against that company’s attempts to evict 300 refugees from their homes in Glasgow. A court case challenging the evictions is currently in progress. In Yorkshire and the North East, Mears is replacing G4S – whose asylum housing has been notorious for squalor, infestations, and scandal when racist vigilantes attacked homes whose doors had been painted an identical red colour.

While this is a big new income source for Mears, asylum landlords have not always had an easy ride financially. Both Serco and G4S complained of losing large sums of money on the previous deals. Financial information on the new contracts has not yet emerged and we do not know if the government bowed to the contractors’ demands to increase payments and profit levels.

There are few specifics yet about how Mears will run the new contracts – and so whether there’s likely to be any change from the miserable record of G4S and Serco.

One notable point: from September 2012 until 2016, Serco’s Scottish asylum housing was largely sub-contracted to another scandal-hit company, Orchard & Shipman. Mears’ current Chief Operating Officer, John Taylor, was Chief Executive of Orchard & Shipman when they won the deal working with Serco. He then moved to Mears in 2013. Presumably his experience will have helped with Mears’ bid for the new contract.

For more information on the new asylum housing contracts see our recent article.

For background on the previous contracts, and on the asylum housing system overall, see The UK Border Regime chapter 5. The Unity Centre in Glasgow and SYMAAG in Yorkshire are two groups actively supporting the struggle for decent housing for refugees.

Ministry of Defence bid

Mears’ other big government tender was less successful. It had hoped to take over the contract to run much of the Ministry of Defence’s main accommodation estate in 2018, after Carillion went spectacularly bust. Mears lost out to rival outsourcer Amey. Mears does have another smaller MoD contract – since 2016 it has run the military’s “substitute service family accommodation”, to find private sector housing for military personnel.

“Non-profit” subsidiaries: “blurring the boundaries” of private and social

One important trend in the UK housing world is the convergence of “private” and “social” sectors. Mears is an enthusiastic part of this. As mentioned above, it boasts that one of the key features of its “placemaking” business strategy is:

“Blurring of the boundaries around social, affordable and private rented housing”.

What exactly does this mean in practice? To start with, Mears has two “affordable housing” subsidiaries called Omega Housing and Plexus UK (First Project). Both are wholly owned by Mears and are registered with the government’s Social Housing Regulator as “social housing providers”. They are listed as “non profit” but are companies limited by guarantee rather than charities. At the end of 2017, Omega managed around 1,000 properties, and Plexus over 1,700. In addition, Mears stated in a June 2018 investor presentation that a “key priority” is to also achieve Registered Provider status in Scotland.

Just what is a profit-seeking company doing running “social landlords”? While technically “non profit”, these subsidiaries can help other parts of the business make money. This comes across clearly from Mears’ website page on its “affordable housing” operations. Councils often require new developments to include a proportion of “affordable housing” in order to meet planning stipulations, called “section 106” agreements. Mears is clear about how Plexus and Omega can play this role, saying that its affordable housing arms “assist and support developers on section 106 agreements.”

Secondly, the “affordable” subsidiaries can be used to access public grants:

“We work with investors to purchase stock where we can secure long leases at affordable rents and can utilise Local Authority funding in addition to leveraging in private institutional funding.”

Thirdly, they will help develop relationships with key “partners”, such as local councils, who Mears may also work with on more profitable developments. Mears can offer a suite of services to its partners, from high-end luxury sales to temporary accommodation for the homeless.

In particular, one model Mears is pushing is converting empty commercial property, such as old offices, into “affordable housing”. For example, in recent developments in Luton and Basingstoke.

The National Planning Portal

One Mears subsidiary, called Terraquest, is unlike other parts of the business. It deals in information. Terraquest’s main work is “land referencing” – researching and identifying rights over property, including ownership rights but also things like planning permission. It also has other business lines including employer security checks.

How does Terraquest fit into Mears’ strategy? Most obviously, as it says on its website, Land Referencing is a crucial tool for property developers – it “enables developers to acquire land and rights over land to meet their development requirements in a timely manner.”

But there may also be something more. Mears’ business is above all about “partnership”, making joint ventures and contracts with other developers – especially government bodies, councils, and housing associations. Many of these are Terraquest’s customers.

Mears/Terraquest’s biggest coup is running a big piece of the whole UK planning system: 90% of all planning applications in England and Wales (according to a Mears presentation) go through one internet system called the National Planning Portal. If you try to submit a local council planning application online, you will probably be redirected there. The national portal is set up by the government’s Ministry of Homes, Communities and Local Governments. But it is run privately by a joint venture – which is 75% owned by Terraquest.

There is no suggestion that Mears uses the nationwide planning data it manages to gain an unfair advantage in its own developments. But, at least, providing this service must give it a real familiarity with the planning system and how it works across the country.

Home care

Mears’ first attempt to make money from old and disabled people’s need for care at home came in 2007 when it bought a home care company called Careforce. More acquisitions followed – most notably Care UK’s home care division in 2015 – and by 2015 Mears had become the second biggest home care provider in the UK.

However, the ‘market’ has not been as profitable as Mears hoped. Most of Mears’ contracts are with cash-strapped local authorities. Even with infamously low wages being paid to staff, many contracts do not pay enough for companies to break even.

As a result Mears has had to scale back its ambitions. It finally turned a – very small – profit on home care in 2017, after it had closed a fifth of its branches, mostly in the north of England. Mears now provides care for 15,000 people a year. Its revenues from this in 2017 were £134 million, down from £152 million the year before. The company says it is still trying to grow its home care business but only with contracts that “can provide clear and sustainable margins” (in other words turn a profit).

When we investigated Mears in our Home Care Business report two years ago, we found the company appeared, on the whole, to be providing a better service than its for-profit rivals. However, there were still instances of appalling care. Failings in one branch saw people left without medicine and meals.

We also found that while staff pay at Mears may have compared well to that at other major home care companies, it was still barely above minimum wage. Mears says its care workers are paid above minimum wage and that “it is central to our strategy that care workers are properly recognised as the skilled workers they are”. However, staff turnover remains, in Mears’ words, “unsustainable”. A massive 42% of staff left the company in 2017.

A few recent scandals

While it has enjoyed recent success winning big contracts, things haven’t been going so well for Mears in the deals it already has. Its flagship regeneration contract in Milton Keynes may be hitting the skids, while it has recently lost a major deal in its own home turf of Gloucestershire. Meanwhile, allegations of overcharging scams and possible council corruption hang over deals from Brighton and Scotland.

Milton Keynes regeneration vehicle

YourMK is, or was, Mears’ flagship regeneration project: a £1 billion “partnership” with Milton Keynes council to redevelop seven major estates over 15 years, affecting 8,500 homes. Mears likes to boast about this scheme. For example, a slide in a June 2018 investor presentation gave a list of “housing challenges”. For all of these, the solution was, of course, Mears, “evidenced by .. YourMK”.

The scheme is a 50/50 Joint Venture with the council. Set up in 2015, it initially had the relatively straightforward aim of maintaining the council’s existing stock. But it was soon clear that the “Placemakers” at Mears were thinking well beyond just doing repairs. A Mears “think tank” brochure from 2016 flags up ideas for a “mixed market approach” involving “bond finance”, “private sale”, and “scope to create [a] subsidiary vehicle that could deliver funding over 30-40 year term”. All of which could be very profitable for Mears and other private sector partners.

But, less than two years into the scheme, the wheels started to fall off. Residents on the first estate targeted, Fullers Slade, protested at being “let down and ignored” by YourMK. The council put the regeneration scheme on hold in January 2018. And in July, the council made a number of U-turns to bring “community engagement”, “neighbourhood employment”, and repairs management teams back in-house to council control.

Mears is still employed as repairs contractor but now under council management and with its work “clearly badg[ed] .. as undertaken by Mears Group PLC” to “remov[e] confusion for tenants”. The council also announced it would change the “structure, operation and senior management of Your MK”. It is not yet fully clear what this will mean for the partnership with Mears.

Things got even worse for the deal in October 2018. According to the Milton Keynes Citizen, the council asked its auditors to investigate allegations that Mears had overcharged for repairs by up to £80,000 a month, and that £15 million of council money is “currently unaccounted for” by Mears. The Citizen reports council leader Peter Marland saying:

“The council received a whistleblowing allegation regarding spending on our housing repairs contract. We have asked our external auditors to investigate fully, as is right, to establish if the allegation has any basis and will act accordingly.”

A Mears spokesperson said: “Mears does not in any way recognise these claims and are not aware of any audit being undertaken within the council. Mears operates transparent accounting in all of our public contracts.”

At the time of writing, the YourMK website has been closed down, with a page announcing that information will be updated in April 2019.

Click here to contact us if you have any further information about the YourMK partnership or Mears’ activities in Milton Keynes.

Brighton overcharging scandal

The Milton Keynes deal is not the first time Mears has had to deal with overcharging allegations, or with whistleblowers.

Another big Mears’ contract is the £200 million, ten year housing maintenance deal with Brighton and Hove City Council (BHCC), which began in 2010. A council investigation found that it had been overcharged by over £500,000 for some 1,000 plastering jobs. The overcharging came from another company sub-contracted by Mears but the council’s audit review found that “it had not been picked up because of insufficient control mechanisms operated by Mears.” The council’s report also acknowledged a general “break down in trust” between the council and Mears. But the plastering scam was not an isolated incident.

In 2016, the Brighton Argus reported residents’ complaints of “being charged up to £30,000 at twice the cost advised by independent surveyors.” And in October 2017 the council started a new investigation into further overcharging “discrepancies” with electrical work carried out directly by Mears. This is “estimated to be in the order of six figures again”, according to the Brighton and Hove News.

At the time of writing, Mears is still working in Brighton. But the contract will come up for renewal or retender in 2019.

Picture: from Brighton & Hove Housing Coalition

Scottish corruption allegations

In Scotland, Mears has a major contract with North Lanarskhire Council, worth an estimated £445 million over ten years, to maintain the council’s 36,500 council homes, as well as schools and public buildings.

The contract started in January 2011, as a “partnership deal” between the council and a company called Morrison Facilities Services Ltd, a subsidiary of Anglian Water. In 2012, Mears bought out Morrison and took over the deal. The joint venture is now called “Mears Scotland”, with Mears holding 67% of the stock and the council 33%.

The managing director is Willie Docherty, whose wife Sadie Docherty was Lord Provost of Glasgow between 2012 and 2017. Before joining Mears in 2012, Willie was head of Glasgow’s “arms length” company City Building, which was spun-off from the city council’s old building services department – and became embroiled in scandals over awarding contracts to several Labour Party donors.

In January 2015, North Lanarkshire’s Labour council hit a crisis, as one Labour councillor named Tommy Morgan was sacked from his role as chair of the “audit and governance panel”. Scottish media reported allegations that he had been ousted for “asking awkward questions” about the Mears contract. Later, Morgan said he was suing the Labour Group over the issue.

In July 2015, council leader Jim McCabe was reported by opposition councillors to the Public Standards Commissioner. According to the Scottish Herald, Mears had “just secured substantial concessions in its housing repairs contract with the council – costing the authority some £25m,” while “a report from the council’s own auditors, accountants Scott-Moncrieff” said “councillors had not had full facts before deciding not to re-tender the deal.” An SNP councillor then asked the Commissioner to investigate whether McCabe had failed in not declaring his personal friendship with managing director Willie Docherty.

The Commissioner’s investigation cleared McCabe, concluding that his actions “did not amount to a contravention of the Councillors’ Code of Conduct.” McCabe resigned from the council in January 2016, after 18 years as leader. Later that year, the chief executive of North Lanarkshire asked police to review separate claims that McCabe had been on a holiday to Turkey with another Mears executive, Steve Kelly. McCabe insisted: “all holidays I have been on, I have paid for. And I can prove that beyond any doubt.” McCabe did take gifts of dinners, whiskey and chocolates from Mears, but these were legally declared on the council’s website. A separate investigation by Audit Scotland also concluded that the council’s accounting of money payments in the Mears contract was not illegal.

In short: allegations have flown thick and fast around the Mears Scotland contract, and there is no doubt that the council leader was close to Mears executives. But there is no evidence of any illegal wrongdoing.

The Mears Scotland contract will be up for renewal in 2020.

Picture: Mears Scotland promotional photo, Willie Docherty is standing, on the left.

Repairs problems in Stroud and elsewhere

In 2017, Stroud Council, in Mears’ own county of Gloucestershire, cancelled its £4 million maintenance contract with Mears after just one year. The contract began in 2016 and was set to last for up to 10 years. According to local press, Mears agreed to end the contract after “heavy criticism about its council housing repairs and maintenance work”. A council spokesperson said “Mears were unable to maintain the high standards we demand of our contractors, and also found elements of the contract commercially challenging.”

Other areas where complaints about Mears have made the news for the wrong reasons include the London boroughs of Walthamstow and Islington, where they work for Family Mosaic housing association (now part of Peabody Group), and also Cornwall.

Apprenticeship inspection

Mears prides itself on having an educational role. In the latest (2017) annual report it describes itself as “a national Social Mobility Champion and leading employer of apprentices”. In 2017 it had 345 housing apprentices and 224 care apprentices.

However, the education inspectorate Ofsted gave the “Mears Learning” division, which runs apprenticeships in the company, a negative rating of “insufficient progress” in its report in May 2018.

Industrial disputes

The trade union Unite announced victory in its strike over a pay dispute with Mears in Manchester in February 2018. According to the union, workers at Manchester Mears and Manchester Working (a joint venture with the council) “were being paid up to £3,500 less than colleagues for undertaking the same work”. The company agreed to raise and equalise wages after 80 days of strikes.

Beards row

In June 2017 Mears made headlines when it tried to ban workers from having beards. It told maintenance teams they needed to shave in order to “wear appropriate dust masks effectively”. Unite the Union accused Mears of “penny pinching stupidity”, saying it should just pay for better dust masks that can cover beards.

People

Chairman: Kieran Murphy

Mears’ long-time chairman Bob Holt was recently pushed out by the second biggest shareholder, German investor Shareholder Value Management. It alleged Holt – who cut his business teeth working for notorious Tory donor Lord Ashcroft – had “continually failed to challenge the status quo” of “deteriorating results, a stagnant share price and faded shareholder value”. Holt was paid £285,000 for 2017.

His replacement, Kieran Murphy, is an investment banker rather than a builder. Murphy started his career as a Treasury civil servant in the 1980s before heading into the private sector working with German investment bank Dresdner Kleinwort. There he became a managing director and “head of industrial sector”. He then worked from 2004-15 as a partner and “senior advisor” at Gleacher Shacklock, a corporate finance consultancy set up by another ex-Dresdner banker. His career has been advising businesses on financial deals such as raising money or buying other companies.

Nowadays, Murphy sits on the boards of large “public sector” organisations as well as private companies. He is the chairman of the Ordnance Survey, the government mapping service – which could be useful for Mears’ work running the National Planning Portal. He is well connected in the university world, as a former director of City University and now of the University of London. He also chairs the investment committee at University College London hospital. Of course, these institutions are also big property owners and developers in their own right.

In: Kieran Murphy

Out: Bob Holt

Chief Executive: David Miles

Miles is a long-term Mears manager. An electrical engineer by trade, he worked at Mitie back in the 1990s but joined Mears in 1996 when it went public. He ran Mears’ social housing division and was “chief operations officer”, before rising to CEO in 2010.

Miles was paid £443,000 in 2017. Miles’ 2017 pay included a basic salary of £369,000 plus £55,000 pension contribution and £19,000 “taxable benefits”.

But he was also eligible for a bonus on top of his salary of up to £774,000, which would have taken his income well over the million mark. However, his bonus pay is linked to the company’s financial performance, and with Mears’ finances slightly reduced from the previous year, Miles didn’t get any of his bonus in 2017. In fact, he hasn’t made anything like his possible top bonus in the last four years.

Still, his £443,000 was more than 20 times the average Mears employee’s salary of £21,684.

David Miles

Other executives

The finance director, C.M. Smith, and executive director Alan Long are also Mears stalwarts, having worked at the company for 18 and 12 years respectively. They were paid £294,000 and £248,000.

John Taylor, Chief Operating Officer, is a newer arrival. Until 2012 he worked at Orchard & Shipman, another “property management company”. Notably, Orchard & Shipman were sub-contracted by Serco to run much of their asylum housing contract in Scotland between 2012 and 2016. This is effectively the same contract that Mears have now taken over from Serco.

A few non-executive directors

Mears’ strategy involves networking across the “blurring boundaries” of high finance and charitable housing provision. This is reflected in the “non-execs” on the board, who are plugged in to these different parts of the regeneration industry.

To give a few examples, non-executive director Julia Unwin is a high-flyer in the charity sector who also has a foot in the privatised water business. She is former Chief Executive of the Joseph Rowntree Foundation and the Joseph Rowntree Housing Trust and also now a director of Yorkshire Water.

Elizabeth Corrado is linked to the booming world of “social finance”, where investment banking meets “philanthropy” – for a profit, of course. According to her Mears profile she has worked as an investment banker and government advisor on structured finance, and was “until recently an Executive Director of the Power to Change charitable trust”.

Roy Irwin was the Chief Inspector for housing of the Audit Commission, the official body which audited local councils’ finances – until it was scrapped in 2012, with its functions privatised. He then found a home at Mears in 2013, becoming Chairman of its “social landlord” businesses Omega and Plexus. In 2017 he also joined the board.

Shareholders

Mears’ shares are bought and sold on the London Stock Exchange. As a result a range of different investors own stakes in the company. At the time of writing, the top five biggest stakes are held by investment funds:

PrimeStone Capital LLP 12%

Shareholder Value Management AG 9%

Majedie Asset Management 9%

Heronbridge Investment Management LLP 7%

Schroder Investment Management Ltd 5%

Most companies on the stock market have similar ownership profiles, with no single investor having close to a majority stake. As a result, while a company may be acting primarily in the interests of its shareholders, responsibility for its actions is difficult to lay at the door of any one shraeholder.

However, Mears’ two biggest shareholders see themselves as ‘activist investors’ that involve themselves in the running of their companies.

Mayfair-based PrimeStone Capital describes itself as working “constructively with management and stakeholders to create long term enduring value.” Primestone was founded by Franck Falezan, Benoît Colas and Jean-Pierre Millet, three financiers previously with The Carlyle Group, a major US venture capital firm.

Shareholder Value Management (SVM) is a German investment firm based in Frankfurt. It has been particularly involved in Mears’ governance in the last year as it successfully led a move to oust long-term chairman Bob Holt (see the people section).

However, the Mears’ board rejected SVM’s attempt to replace him with Andy Hogarth, their preferred pick, saying board appointments should not “be imposed on us by a single shareholder.”

If Mears does face financial difficulties in coming years and is unable to pay out the dividends its shareholders have become accustomed to, expect more disagreements between management and shareholders.

Mears slogan: “making people smile”

Finances

In its last annual report, for 2017, Mears’ work brought in revenues of £900 million. All of that came either directly from the public sector – through local authorities and NHS Trusts or from housing associations. This was slightly down on the previous year but overall Mears has grown quickly. Its revenues more than doubled in size over the previous ten years, increasing from £420 million in 2008.

After all costs were taken off, Mears’ profits were over £20 million each year between 2014 and 2017, and solidly above £10 million in the years before that. Mears will release its results for 2018 in March. In an early announcement to the stock market, CEO David Miles said it had been a year of “very good progress” and that business had been in line with expectations.

Mears is a ‘public limited company’ (PLC), meaning its shares can be bought and sold on the London Stock Exchange. Investors reckon the company’s shares are worth £3.30 each and £363 million when they are all added together (market capitalisation, in the jargon). That puts Mears’ value on a par with companies such as lorry firm Eddie Stobart and Hotel Chocolat.

Consistent profits have allowed Mears to pay millions out in dividends (the jargon for the cash paid out) to its shareholders. Mears paid out £12 million in 2017, up from £11 million the year before. In the five years between 2013-2017, Mears paid out £52 million in dividends, with the amount rising each year.

Mears’ financial health at first glance appears solid. Borrowing too much from banks and other lenders is a major reason why construction and maintenance companies go bust, Carillion most recently. At present Mears does not appear to be close to the same fate.

According to its published accounts, the new activities in its housing and care businesses have not been funded by taking on lots of extra debt. As of 2017, the last year for which full financial results are available, Mears had not increased its levels of borrowing, even with its move into housing development rather than simply maintenance.

Long term debt amounted to £51 million in 2017, down from £60 million the year before, all arranged through credit deals with Barclays and HSBC banks. As of 2017, Mears has the ability to borrow £170 million through those deals if required, plus a new £30 million pot it can access for its new scheme to buy property before selling them onto to long-term developers (see the housing section).

Mears just missed a target for covering its debts in 2018.ⁱ But the company said that was mainly due to cash reserves being lower than planned due to being paid for certain activities slightly later than expected.

However, a potential worry for Mears is that its business model depends on winning new maintenance or care contracts every year. Mears makes much of being a high quality and socially responsibly company. If that reputation takes a hit, and local authorities and housing associations are more reluctant to use the company, Mears’ finances would look a lot less secure.

There are already hints to what could happen in Mears’ accounts. Company Watch (no relation to Corporate Watch), a financial analysis firm used by the government, recently described the business models of outsourcing giants Serco, Capita, Interserve and Mitie as “bankrupt”. Mears shares some of the characteristics the analysis pointed to as potential problems.

Like those companies, Mears is operating in ‘low margin’ businesses, facing competition for contracts that, for the most part, do not allow for significant amounts of profit to be made. Mears’ profit ‘margin’ has hovered around 3% for the last ten years, just like the big four outsourcers.

Added to this, Mears – like Serco and the rest – does not own a vast array of ‘tangible assets’ such as buildings, land or equipment that it could sell or rent out in the event it needed to raise cash (but see the housing section, above, for details of Mears’ current attempts to change that).

According to Mears’ 2017 accounts, the value of its long term assets add up to £237 million. Just £22 million of those were tangible assets. Most of the rest, £194 million, were made up of ‘goodwill’. This is a slippery accounting concept that appears when one company buys another for more than the value of its assets at the time of purchase (see a fuller explanation here). The idea is that the acquired companies will in time generate wealth equivalent to the purchase price, so that should be recognised in the accounts. But thanks to amendments to regulations made under the Blair government, companies have been able to use this to artificially inflate their overall worth, with Carillion again the most notorious example (click here for an in depth look at this by the Financial Times).

Goodwill amounts to over 40% of Mears’ total assets – a bigger proportion than Interserve and Mitie, slightly less than Serco and Capita.

Mears’ goodwill comes from their acquisitions of housing and care companies. Without this, the overall worth of the company according to its accounts would drop from £210 million to just £15 million. So can Mears confidently expect the acquired businesses to bring in profits to justify the current valuations?

Almost £100 million of the goodwill is for the home care businesses Mears has bought (see the section on home care above for details). Many home care companies are facing severe financial difficulties, with market leader Allied Healthcare recently at the brink of going under.

Mears’ home care operations only broke even in 2017. Its accounts contain a long justification for the potential of its home care business, and thus maintaining the value of its goodwill. But these all depend on increased local authority funding, which is hard to predict with any confidence.

If Mears does, at some stage, have to accept that it overpaid for its home care businesses, its overall worth could be significantly reduced.

The same applies to the £94 million Mears currently estimates the housing businesses it has bought to be worth (this may have increased significantly with the purchase of Mitie’s housing division in 2018).

Do you have information about Mears you’d like to share with us? Click here to get in touch.

The post Mears Group: scandal-hit council housing profiteer turns asylum landlord appeared first on Corporate Watch.

A private “social housing” business, Mears Group, is about to become one of the UK’s biggest refugee landlords, winning three ten year asylum accommodation contracts from the Home Office worth a total £1.15 billion. When the contracts start in September 2019, Mears will run asylum seeker housing in Scotland, Northern Ireland, and in Yorkshire, the Humber and the North-East of England.

The UK’s asylum housing system has become notorious for its slum conditions. Refugees are scattered around the UK into the cheapest possible housing, sub-contracted to local landlords by the corporations who win the main government contracts. It remains to be seen whether Mears will do things any better than its competitors in the business. (See Chapter 5 of our book The UK Border Regime for much more on the asylum housing and “dispersal” systems.)

At the same time, the charity Migrant Help has landed a £100 million contract to run the Home Office system called “Advice, Issue Reporting and Eligibility (AIRE)” services. It will be the official point of contact for refugees to get advice on their asylum claims, and will also work with Mears and the other accommodation providers. Migrant Help will earn between £10 million and £20 million a year from the deal, which will initially run for four years from September, but can be extended for up to ten years. It has already been doing similar work for the Home Office since 2014.

The AIRE advice contract also involves advising refugees on what do if their claims are refused. That specifically includes telling them about “the support available to return to their country of origin.” The Home Office has a clear focus on pushing people to leave through so-called “voluntary return”, and will see Migrant Help as playing an important role in meeting its “removal” targets.

G4S gone, but the system stays the same

Mears’ asylum housing deals are part of the overall system where the Home Office contracts refugee housing out to private corporations in a number of big regional contracts. This approach was set up in 2012, when six regional deals named “COMPASS” went to three companies: G4S, Serco, and Clearsprings Ready Homes.

The new round of contracts have a new name, AASC (Asylum Accommodation and Support Contract), and seven instead of six regions – Scotland and Northern Ireland have been split into separate deals. But otherwise the basic structure of centralisation and privatisation is the same. Previously, asylum housing was provided by a range of landlords including local authorities.

In Scotland, Mears takes over from Serco, after a strong local campaign against that company’s attempts to evict 300 refugees from their homes in Glasgow. In Yorkshire and the North East, it is replacing G4S – whose asylum housing is notorious for squalor, infestations, and the scandal when racist vigilantes attacked homes whose doors had been painted an identical red colour.

G4S, still suffering from attention on brutality in its Brook House detention centre, has now lost all its asylum housing contracts. Serco, though out of Scotland, has kept its contract for North West England, and will also take over from G4S in the Midlands and East of England. Altogether, Serco is now the biggest asylum landlord, with contracts worth £1.7 billion. Clearsprings Ready Homes holds onto its smaller contracts in Wales and the South of England.

Mears’ big score

Will Mears do a better job than its predecessors? Certainly, this company doesn’t have the inglorious reputation of notorious outsourcing giants Serco and G4S. Mears is a much smaller company than either of those, and has no previous experience in asylum housing. Its main business lines include providing repairs, maintenance, and other services to housing associations. It also has a home care division – we have looked at the company before as one of the UK’s main home care profiteers.

We are planning to publish a new company profile of Mears very soon. If you have have any information on the company, please get in touch!

Update: see our new company profile of Mears Group here.

New Asylum Housing Contracts

Midlands and East of England. Value (over 10 years, estimated at start of contract): £800m. Winner: Serco

North West England. Value: £900m. Winner: Serco.

North East, Yorkshire and the Humber. Value: £600m. Winner: Mears Group.

Northern Ireland. Value: £50m. Winner: Mears Group.

Scotland. Value: £500m. Winner: Mears Group.

South of England. Value: £800m. Winner: Clearsprings Ready Homes.

Wales. Value: £300m. Winner: Clearsprings Ready Homes.

Sources: contract values and specifications from tender announcement on European TED database; winners announced on Home Office website, 8 January 2019.

Picture by John Grayson.

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