• eCourier has paid out £5.5 million to its owner Royal Mail in the last two years.
• Royal Mail has not invested any money into the business since it bought eCourier in 2016.
• eCourier’s boss was paid £134,000 last year.
• Major Royal Mail shareholders include the Greater Manchester Pension Fund, which expects “secure, direct employment” for company staff.

Basic rights, big payouts

At the end of last month, couriers organising through the IWGB union voted for strike action after “gig economy” company eCourier “refused to grant them basic employment rights and a living wage”.

The company currently classes the majority of its workforce as independent contractors and the couriers are demanding the London Living Wage and ‘worker’ contracts, which give more rights and benefits. In response, eCourier says it is already offering worker contracts to couriers who qualify for that status (for more details you can read the IWGB’s press release here and the statement eCourier gave Corporate Watch at the bottom of this article).

eCourier offers same day delivery services, mainly in London and the south-east. Clients include HCA Healthcare, Goldman Sachs and NHS hospitals. IWGB couriers have previously won better pay and conditions in delivery companies including Citysprint and The Doctors Laboratory, which Corporate Watch also investigated.

eCourier publicity, ecourier.co.uk

eCourier was a family-owned business until 2016, when it was snapped up by Royal Mail for £17 million. Three years after its 2013 privatisation, Royal Mail was keen to gain a bigger chunk of the growing courier delivery market.

But accounts filed at Companies House show that, since it bought eCourier, Royal Mail has been taking money out of the business rather than investing to help it grow.

In the two years since the takeover, eCourier has paid out £5.5 million to Royal Mail in dividends. In the previous three years, eCourier paid out just £130,000.* The increase comes even though eCourier’s revenue and profits have hardly changed.

While it has extracted huge amounts that could otherwise have been paid to couriers, Royal Mail has not put any money into eCourier. The £17 million it paid for the company in 2016 appears to have gone to previous owner Ian Oliver. Accounts published since the takeover show eCourier has received no investment from Royal Mail.

At least some people at eCourier are making a decent living. The (unnamed) highest paid director made £134,000 in 2018, and similar amounts the two previous years.

‘Marred by misfortune’

Further up the corporate chain, bigger money is being made. Royal Mail is a huge company: it brings in revenue of over £10 billion a year, with operating profit from that close to £500 million. Giving the couriers the employment and pay they are demanding would barely make a dent.

Certainly, those at the top of Royal Mail do ok. CEO Rico Back was given a £5.8 million ‘golden hello’ before taking the top job last year, then £647,000 for his first year of work. Not bad, given “his short tenure has been marred by misfortune”, according to the Financial Times, with a falling share price and the threat of a major strike by postal workers.

Royal Mail CEO Rico Back, royalmail.com

The people that ultimately own Royal Mail – and therefore eCourier – have also enjoyed good times. Royal Mail paid its shareholders £242 million in dividends last year, and similar amounts in previous years. Back has announced payouts will be reduced in future, as Royal Mail invests to keep up with the competition, but they are still scheduled to remain above £100 million.

Who are the shareholders receiving these payouts? The biggest is Schroders Plc, a giant investment firm that owns a chunk of most major companies in the UK. Records show it owns 12% of Royal Mail shares. Next are fellow investment giants Standard Life Aberdeen and Blackrock, then Norges Bank Investment Management, which invests the proceeds of Norway’s oil and gas sales (6%, 5% and 3% of shares in Royal Mail respectively).

Another major shareholder of note is the Greater Manchester Pension Fund, which invests the pensions of local government workers in the area. The fund’s stake in Royal Mail is worth £67 million. In its latest annual report, it says businesses it invests in should: “offer secure, direct employment where possible, and should not interfere with the right of their workforce to seek representation through a trade union.”

We put all the points about eCourier’s finances above to Royal Mail who did not dispute their accuracy. An eCourier spokesperson told us:

“We are committed to operate best practice in terms of modern working practices and the need to ensure the most effective and appropriate delivery models. Many of our couriers prefer to work as independent contractors because of the additional flexibility it brings. We have offered worker status to self-employed colleagues where it reflects their actual working arrangements with us, and where they decide to make the change.”

* Note: Former owner Ian Oliver may also have profited from payments made by eCourier to other companies he owned.

The post eCourier paying millions out to owner Royal Mail while denying workers ‘basic employment rights’ appeared first on Corporate Watch.

The latest accounts of England’s nine water and sewerage companies show their highest paid directors shared £11 million between them last year.

Our research, commissioned by the GMB union and released by them earlier this week, shows water companies have paid their bosses £70 million in the last six years.

Click here to read our analysis of bosses’ pay after a similar exercise last year.

The post Water bosses’ pay 2018 appeared first on Corporate Watch.

Priory Healthcare is part of the Priory Group, one of the UK’s biggest mental healthcare providers. An investigation by Corporate Watch into the Priory Group’s finances over the last ten years, suggests the fine will hardly make a dent in the huge profits and payouts its owners and bosses enjoy:

• The fine represents less than two days profit for the Priory group, which made an operating profit of £62 million in 2017, the last year for which results are available. The vast majority of this came from the NHS and Social Services.

• The Priory group gave its boss at the time of Amy El-Keria’s death a £458,000 ‘golden goodbye’ when he left that year – more than half again what the company was fined.

• Priory has paid out £171 million in interest to its owners Acadia Healthcare in the two years since the US company bought it.

• Advent International, the US investment firm that previously owned Priory at the time of Amy’s death, made a £375 million profit when it sold the company in 2016.

• In the year Amy El-Keria died, Priory received a £1 million tax rebate back from the government, thanks in part to a Channel Islands tax avoidance scheme set up by Advent.

We put all these points to Priory. They did not dispute the figures but made a series of points, summarised below.

Priory Hospital Ticehurst House, priorygroup.com

‘I will not stop fighting until this stops’

Amy El-Keria was found hanged in her room at the Priory’s Ticehurst hospital in East Sussex in November 2012.

Last month, the company was fined £300,000 after pleading guilty to a criminal charge brought by the Heath and Safety Executive for breaching the Health and Safety Act.

After the sentence was passed, Amy’s mother Tania El-Keria said:

“This was Amy’s first ever hospital admission. She was alone, far from her home and her family. By day two she had been restrained by staff. She went on to be restrained many more times including on the day before her death, with forced sedative injections applied against her will.

“The night Amy was found staff didn’t have a key to open her locked door. A healthcare assistant entered but didn’t have a radio and ran out leaving her hanging. Staff were not trained in basic life support and for 10 minutes she was left lying on the floor until the duty doctor arrived and started CPR.

“My 14 year old Amy was put alone, unconscious in an ambulance. No-one went with her to hospital and no-one bothered to tell her family what was going on until many hours later. This is not what care looks like.”

An inquest jury in 2016 had previously found neglect and failing by Priory contributed to Amy’s death. These included inadequate levels of staffing and training.

The charity INQUEST says it knows of at least six other young people who have died while receiving Priory mental health care. In an ITV documentary released after the sentence, an undercover reporter revealed “serious failures of care” in Ticehurst, including a teenager spending weeks wearing just a blanket.

Tania El-Keria called Priory “morally bankrupt” and said:

“They continue to take large sums of public money, allowing our children to suffer by placing profit over safety. This cannot be allowed to continue, and I will not stop fighting until this stops.”

Understanding the Priory group

The Priory prosecution was the achievement of six and a half years of hard work by Amy’s family and INQUEST. As is typical with prosecutions of companies, no individuals were charged, with the company itself being held accountable.

The fine decided on by the judge to punish the company, taking into account Priory’s guilty plea and steps made to improve the service, was £300,000.

Priory Group logo, priorygroup.com

What effect will this have on the company and the people who ultimately control it? First off, let’s be clear what we mean when we say the Priory group.

The company prosecuted was called Priory Healthcare Ltd. This company runs Ticehurst hospital, where Amy died, as well as another 11 hospitals facilities registered with the Care Quality Commission, plus six “wellbeing centres”.

However, the Priory group is a much bigger organisation. It runs a variety of services in addition to hospitals like Ticehurst, including residential schooling for children with autism, and nursing or residential care homes (through the Partnerships in Care brand). It cares for more than 30,000 people each year across 450 sites.

Ultimately, it’s the overall profitability of the group as a whole that Priory bosses and owner are most bothered about. And the £300,000 fine imposed by the judge, following appropriate law and regulation, hardly makes a dent in those overall profit figures.

Record fine, bumper profits

The fine was based on Priory Healthcare Ltd’s turnover of £133 million in 2017 (the latest year for which results are available).ⁱ

The overall accounts of the Priory group show its total revenue was almost six times higher: £797 million in the same year. The vast majority of this was from the public purse: £418m from the NHS and £302 million from Social Services.

After the costs of running its services were taken off, Priory was left with an operating profit of £62 million. That works out at around £170,000 a day.

The fine for Amy’s death therefore represents less than two days of profits.

The previous year was even more lucrative for Priory: revenues of £824 million and profits of £84 million.

Those at the top of the company have been made rich. Company accounts show the – unnamed – highest paid director was paid £502,000 in 2017 and £1.6 million the year before.

But the biggest beneficiary has been US company Acadia Healthcare, which bought Priory in early 2016. In just those two years, Acadia has received £171 million from Priory.

To see how that’s happened, we need to delve into another complicated financial web.

Enter Acadia

Acadia paid £1.5 billion to buy Priory from another US firm – Advent International (more on them below) – at the beginning of 2016.

Acadia logo, acadiahealthcare.com

Acadia put £500 million of its money into shares in Priory and lent the company the remaining £1 billion – at an interest rate of 7.4%, paid annually. As a result, Priory’s accounts show it has already paid out £171 million in interest to Acadia in the two years since the acquisition.ⁱⁱ

Not all of this is profit as Acadia is using some of this to pay interest to its own lenders. Acadia borrowed around two thirds of the money it needed to buy Priory in 2016 from banks and other lenders. The final third was raised by issuing new shares that it then sold to investors, in return for stakes in the company (and thus a share of future profits).

Reeve B Waud, waudcapital.com

Acadia’s annual financial reports show the company is paying much lower rates of interest to its own lenders. Corporate Watch calculations – summarised belowⁱⁱⁱ – estimate Acadia pays out around £40 million a year on the money it borrowed to buy Priory.

In 2017, that may have left Acadia with around £45 million from its investment. That’s 150 times more than Priory was fined for the part it played in Amy El-Keria’s death – and money that could have been invested in the care its patients depend on.

Acadia runs over 200 addiction and mental healthcare facilities in the US and Puerto Rico. It was set up in 2005 by Waud Capital Partners, the investment firm of tycoon Reeve Waud, proud owner of a multimillion dollar mansion in estate in the state of Maine). The company is now owned by huge investment firms such as T. Rowe Price and Blackrock.

Advent’s bonanza

As described, Acadia bought Priory from Advent International, a US investment firm. Advent is a “private equity” firm that buys up businesses with the intention of running them for a few years then selling them for a profit. It has investments around the world, with Poundland and sofa retailer DFS two of the UK companies it has owned.

Advent owned Priory at the time of Amy’s death in 2012. It had bought the company in early 2011 for £925 million from the state-owned Royal Bank of Scotland and other investors including major Tory donor Lord Ashcroft.

As previously exposed by Corporate Watch, after buying Priory, Advent set up a tax avoidance scheme that saved Priory millions in UK corporation tax.

Advent is based in the US, but it owned Priory through different entities based in Jersey and Luxembourg, both of which have very low tax rates. When it acquired Priory, Advent lent its new purchase £130 million through the Channel Islands stock exchange, at a whopping 12% interest rate.

Advent logo, adventinternational.com

This interest was taken off Priory’s taxable profits each year, saving it millions in UK corporation tax. Thanks to a regulatory loophole called the Quoted Eurobond Exemption, the interest payments could be sent to the Advent companies that held the loan notes tax free.

Accounts filed at Companies House for 2012 show Priory racked up £24 million in interest to Advent in the year Amy El-Keria died. As that was taken off the company’s taxable profits, corporation tax of £6 million may have been avoided thanks to this scheme.

Priory’s tax bill was further cut under Advent by interest it had to pay on the almost £1 billion it had borrowed from banks and other lenders. This interest cost Priory £62 million in 2012.

Peter Brooke, Advent founder and chairman, adventinternational.com

The accounts for that year show it made an operating profit of £77 million. Yet once all of the interest to the lenders and Advent was taken off, Priory was able to declare a loss before tax of £11 million.

Instead of paying corporation tax that year, it actually received £1 million in tax back from the government. That same year Priory had received £395 million in public funding.

Company accounts for the five years from 2011 to the end of 2015 show Priory paid just £1.3 million in corporation tax during this period, after total operating profits of £245 million.^iv

Advent bought Priory for £925 million and sold it in February 2016 for £1.5 billion. At the time, the Financial Times estimated Advent’s profits from the sale at over £500 million. However, Priory accounts show it took on an extra £200 million in third party debt during Advent’s time, which would have had to be paid back at sale. As a result, Advent appears to have made a – still very substantial – profit of around £375 million from its ownership of Priory.

Costly compensation

The accounts show in 2012, the year of Amy El-Keria’s death, the highest paid director was paid £829,000. Of that, £458,000 is described as “compensation for loss of office”.

Although the accounts do not name him here, this must be CEO Phillip Scott as elsewhere they, plus other Companies House records, show he was the only director that left the group that year – on 28 November, sixteen days after Amy died. Scott had been in the news the year before as one of the private healthcare bosses who donated to David Cameron’s Conservative Party.

In response to this investigation, Deborah Coles, Director of INQUEST said:

“The marketisation of our mental health system enables companies to put profit over the safety of children in their care. The investigation by Corporate Watch raises serious questions about the Priory’s profits, a concerning level of which are gained from running NHS funded services.

“The lack of any independent system of investigation, allows the Priory to investigate their own actions. This meant it took six and a half years for their criminally unsafe practises to be exposed following Amy’s death. This dangerous and harmful situation continues to this day.

“We know there have been other child deaths involving the Priory. The damning evidence about systemic failings in care begs the question as to whether the Priory’s contract should be withdrawn and reinvested into specialist NHS services.”

Amy El-Keria, family photograph

Priory response

A Priory spokesperson told Corporate Watch it is usual business practice for parent companies to make loans to subsidiaries on which commercial rates of interest are charged. They said all significant tax matters have been fully disclosed and approved by HMRC regulations and practices and that HMRC have awarded Priory a “low risk” rating as a corporate taxpayer. They also said Priory services receive above-average ratings from the Care Quality Commission.

A Priory Group statement said:

“We remain absolutely focused on patient safety and will continue to work closely with commissioners and regulators to learn lessons from incidents and inspections quickly and ensure all concerns are addressed in a timely and robust way.”

Notes

The post The Priory Group: ‘morally bankrupt’ company makes millions for owners while young people die in its care appeared first on Corporate Watch.

15-18 July 2019

London campus, 33 Finsbury Square, London EC2A 1AG

Click here to book now.

About the Course

Corporations wield a huge amount of power over our lives. But we’re not taught how to find out how they work, who’s behind them or how to follow the money. This 4 day course will give you the tools and understanding you need to expose and challenge corporate power and corporate corruption.

• identify key sources of information and data on corporations

• identify the people behind a company

• dissect company accounts

• track where the money goes

• develop your investigation and research skills

• think strategically about how you can challenge corporate abuse

The course will be participatory and practical. Throughout, participants will be shown how to plan and conduct an in-depth investigation of a company of their choice.

No experience is needed: we’ll start from the basics and give you all the skills you need.

Topics we will cover include:

• Investigating and profiling companies: exposing abuse; thinking strategically; identifying ‘weak points’.

• Understanding the corporation: History of the corporate structure; the limits of the law, regulation and CSR.

• People behind the corporation: tracking and mapping directors, shareholders and different types of corporate forms; mapping the corporate structure, locally, offshore and globally.

• Following the Money: reading company accounts and other documents; who’s making money and where it’s going; how is the company performing financially.

• Using the State: obtaining information on tax, regulatory and legal processes; and conducting freedom of information requests.

Delegate fees

Larger organisations: £500

Individual/smaller organisations/union branches: £300

Low/unwaged/students: free (places limited)

Discounts available for organisations booking multiple tickets.

How to book

Click here to book tickets through the University of Liverpool website.

Email contact[AT]corporatewatch.org for more details or call 02074260005.

About the Trainers

The course will be run by Professor David Whyte and Richard Whittell

Professor David Whyte is an leading international expert on corporate corruption and corporate crime. He has been teaching courses on those subjects at the University of Liverpool for the past decade. Recent books include How Corrupt is Britain (2015), The Corporate Criminal (2015, with Steve Tombs) and Corporate Human Rights Violations (2016, with Stefanie Khoury).

Richard Whittell is a member of the Corporate Watch Co-operative where he has produced numerous investigations into companies, in tandem with groups challenging corporate abuse. He is an experienced trainer, having taught company investigations and reading accounts to unions, university courses, campaign groups, NGOs and journalists. He also wrote Corporate Watch’s Investigating Companies: a Do-It-Yourself Handbook.

Corporate Watch is a not-for-profit co-operative providing critical information on the social and environmental impacts of corporations and capitalism.

This event is hosted by the University of Liverpool School of Law and Social Justice Public and Practices Unit and engage@liverpool.

The post Investigating Companies Summer School appeared first on Corporate Watch.

Town centre and street markets are at the frontline of gentrification battles between neighbourhoods and big developers. In Seven Sisters, North London, traders and campaigners are fighting to save the “Latin Village” market, a centre of life for the local Latin American community in particular.

The traders are trying to stop huge corporate landlord Grainger’s ‘redevelopment’ of the area. Grainger is backed by the new ‘Corbynista’ Labour council led by Joe Ejiofor, which seems intent on forcing the development through.

There is a third key player in the scheme: a group of companies owned by two Essex-based businessmen called Raymond Linch and Jonathan Owen. They are on a mission to buy up and “redevelop” markets across the UK.

One of their businesses, named Quarterbridge, was hired as a consultant to help draw up the Seven Sisters market redevelopment plan. Another company they own, called Market Asset Management (MAM) Seven Sisters, now runs the market – and is set to win the lease on the redeveloped site too.

In this report we outline Quarterbridge-MAM’s activities in Seven Sisters, and look deeper at how the business works. We find:

• Owen and Linch have been making handsome profits from Seven Sisters market. They have transferred an average of £100,000 a year of traders’ rental income between their companies.

• After numerous complaints from traders, Jonathan Owen has been forced to apologise for behaviour that included threatening language and racial slurs. Despite this, so far Quarterbridge-MAM has kept its lease to run Seven Sisters market and is slated to run the new market in Grainger’s development.

• Quarterbridge-MAM have used the same basic model in other UK cities: one part of the business advises councils on “redevelopment” plans; then another angles for lucrative contracts running the revamped markets.

• But things don’t always go their way. At least two councils, Leeds and Rochdale, have dropped projects with Quarterbridge-MAM. Leeds’ council leader decided: “We aren’t spending millions of pounds to lose it to a private company.” Rochdale Borough Council concluded they weren’t “the right people to run our cherished market”.

• Quarterbridge-MAM is looking to buy up more markets. To fund expansion, it is now being bankrolled by Places for People, one of the UK’s biggest landlords and housing associations. Last year, Places for People took a 50% stake in Market Asset Management Ltd. This was likely arranged by Places for People’s chairman, Chris Phillips, who works alongside Owen and Linch as a MAM director.

We put the points in this report to Quarterbridge but have not received a reply. We will send the findings to Haringey Council and Transport for London.

Image from Save Latin Village Community Plan for the market

The fight for Seven Sisters market

The Seven Sisters market, often called “Latin Village”, is a hub of the Latin American community in Haringey, North London. It sits inside the ‘Wards Corner’ complex of buildings historically owned by Transport for London, but now set for ‘redevelopment’ by corporate landlord Grainger PLC, with the support of Haringey council (click here to read our recent profile of Grainger).

The battle over Wards Corner has been raging for over 12 years now. Campaigners challenge Grainger’s ‘clone town’ vision for the bustling, ethnically diverse shopping and community centre. The development will not include any affordable housing, while market traders fear their rents will increase and become unaffordable – Grainger has guaranteed rents only for a limited period.

(Click here to read interviews with market traders in the Metro and click here to find out more about the Save Latin Village campaign.)

In fact the first version of Grainger’s proposal did not include any provision for the market at all, just private flats and chain stores and restaurants. The second version included space for just 12 market stalls.

It was only after a successful judicial review brought by campaigners, and the intervention of the Mayor of London, that Grainger began to make any real effort to accommodate a market within its development plans. In 2012, Haringey Council and Grainger drew up a planning (“Section 106”) agreement, which promised a new market space.

According to this, at least some qualifying traders would get stalls in the new market. While building work went on, they would be moved to a temporary site across the road in Apex House – another Grainger development. The new market would be paid for in part by some £284,500 of Mayoral funds.

Enter Quarterbridge

The same planning agreement also defined a role for a ‘market facilitator’ to oversee the transition to the new market. This was where Owen and Linch came in. Also in 2012, Grainger and Haringey Council appointed their company Quarterbridge Project Management Ltd to the market facilitator job.

At the time, Quarterbridge director Jonathan Owen said they were “confident we can design a new Market Hall and stalls that suit everyone’s needs and improve sales turnover.”

But the Wards Corner battle wasn’t over. While housing on the site has been emptied, the market traders held out, few trusting Grainger’s vague promises. Three years later, in 2015, the bulldozers were still not rumbling.

This was when another of Owen and Linch’s companies turned up – a newly registered business called MAM (Seven Sisters). The site owner, Transport for London, awarded them the lease to run the existing market. So at the same time, Owen and Linch were both managing the ongoing business of the market, and advising Grainger on how to knock it down.

And the pair also stand to further profit from Seven Sisters as Grainger has chosen MAM (Seven Sisters) to run the future lease on the new market in its finished development, as well as the temporary market in Apex House while construction goes on.

Quarterbridge and Market Asset Management

So what, or who, are Quarterbridge and Market Asset Management (MAM)? Jonathan Owen, a chartered surveyor, founded Quarterbridge in 1997, according to the firm’s website. Raymond Linch joined two years later.

Jonathan Owen

The business comprises a sprawling network of companies, all run or owned by Linch and Owen. Companies House lists seven companies they own shares in together, with at least one of them serving as director. At least five others under their control are now dissolved or in liquidation.

Their newer companies are all variations on the name “Market Asset Management” (MAM). For example, as well as MAM (Seven Sisters), you can find MAM (Darlington) and MAM (Doncaster), and an overall investment company called just MAM Ltd, which was incorporated in January 2016.

With the business split up into so many different companies, none of which are big enough to have to file detailed financial statements, it is difficult to know exactly how profitable it has been.

But Owen and Linch appear to have done okay over the years. Linch especially: until recently he was ‘Lord of the Manor of Wix’, thanks to his ownership of Wix Abbey, a listed farmhouse on the market for £1.15 million.

Lord of the Manor was at least a real title. Linch has repeatedly claimed he has been appointed as the “London Mayor’s Special Market Advisor”.

Not so, says the Greater London Authority. Responding to a Freedom of Information request at the end of last year, the GLA was clear:

“Neither Quarterbridge, nor any members of its team, serve, or have ever served, as a Special Advisor to the Mayor for Markets. We have contacted Quarterbridge about this issue, and references are being removed from their website and social media channels”.

However, at the time of writing this report the claim remained on the Market Asset Management website.

Screenshot, www.marketassetmanagement.com

Having a network of different companies allows these to play different roles in the market redevelopment schemes they are part of – and to move cash between them. For example, £332,388 was moved from Market Asset Management (Seven Sisters) Ltd to Quarterbridge Project Management Ltd in the last three years, according to accounts filed at Companies House.

The accounts do not describe what this is for, but the vast majority of MAM (Seven Sisters)’s income presumably comes from the rent paid to the company by market traders. The Save Latin Village campaign told Corporate Watch they estimate traders are paying £370,000 in rent. Given MAM agreed to pay £60,000 for its lease in September 2015, with only small increases for inflation, it must be making a significant profit.

After this profit is passed on to Quarterbridge, it ends up with the company’s three shareholders: Linch, Owen, and Owen’s wife Angela.

Linch and Owen also own half each of Market Asset Management (Seven Sisters) Ltd. The two of them are directors of both companies.

The sums transferred from MAM (Seven Sisters) helped Quarterbridge pay dividends totalling £320,000 to Linch, Owen and his wife, in the three years between 2016 and 2018.

But this is hardly likely to be all the money Owen and Linch are making from Seven Sisters and their other deals. None of the Quarterbridge-MAM companies disclose how much they pay Owen and Linch in directors’ salaries.

‘Unacceptable behaviour’

As Owen and Linch count the cash, Seven Sisters traders have voiced serious concerns over the management of their market since MAM took over. They have made at least 13 complaints to site owner Transport for London.

In a letter presented at the market steering group (set up by Grainger) at the end of 2016, traders said Quarterbridge was not maintaining the market properly. Toilets were out of order, the roof was leaking, floors were dirty and pests were starting to appear.

All of this, of course, makes the current market look as though it is in ever more urgent need of redevelopment – which just happens to benefit other parts of the Owen-Linch business network.

Jonathan Owen’s own behaviour and language have come under scrutiny. A 2017 letter from the traders’ solicitors to Transport for London detailed incidents including Owen:

• telling a trader who had complained about his management style: “If you want a fucking war, you will get a fucking war”.

• telling a meeting of traders: “If I wanted to, I could get rid of 90% of the traders here”

• using racially-charged language such as “bloody illegal immigrants” and “not meaning to be Irish” at a meeting of traders.

One trader has described separately how:

“Owen is pretty cutting. He doesn’t look for solutions in his conversations with the traders. He uses insulting language against them. When one of the traders made a complaint he called her a ‘fucking bitch’”.

An investigation by site owner Transport for London found Owen had used offensive language in meetings and in personal conversations with traders.

But despite that, TfL chose to continue MAM’s lease. The landlords reasoned that Owen had now accepted his behaviour had been inappropriate and apologised, and also that a new MAM director, Malcolm Veigas, was appointed to take over day-to-day running of the market.

The Save Latin Village campaign group has since called on Haringey Council, Transport for London and the London Mayor to act on their complaints of “race discrimination, victimisation and harassment by Quarterbridge/MAM”.

Traders call on Sadiq Khan for support

Quarterbridge/MAM did lose one of its Seven Sisters contracts following the complaints. Recently, in March 2019, a letter from the Mayor of London to one of traders confirmed that Grainger has agreed to appoint another facilitator.

Grainger dropped Quarterbridge from its original role as “market facilitator”. One of the role’s duties was supposed to be to “promote the interests of Spanish and non-English speaking traders”.

But Grainger hasn’t dropped Owen and Linch altogether: in fact MAM (Seven Sisters) Ltd still seems to be lined up for the lease on the new market. The Planning Inspector’s report for the recent decision to allow Haringey council to go ahead with the ‘Compulsory Purchase Order’ to buy the remaining land needed for the development confirmed MAM was still slated to be the market leaseholder in the new development.

Campaigners are increasing their efforts to remove MAM from the market, and have launched a final legal appeal to stop the Grainger development. The prize is the chance to deliver the alternative community plan for Wards Corner, taking the future of Seven Sisters market into their own hands.

Turning markets into financial assets

Over the last two decades, Quarterbridge has developed into one of the main companies pushing the gentrification of UK markets. As the company itself explains on its website:

“most of the 468 Councils in the UK own and operate one or more markets in their area. These are delivered as a discretionary service, not a statutory obligation such as education so can be outsourced.”

Quarterbridge’s mission is to encourage councils to replace what it calls their “largely unskilled” management with “professional asset management” – such as that provided by its MAM sister companies, managed in the “professional style” so obvious at Seven Sisters.

The company’s website says its “market acquisitions and developments range in value between £0.5m and £8m depending on size, location and development potential.” This may release some money for cash-strapped councils. But in the long run it is Quarterbridge/MAM raking in the profit, with “larger markets” bringing in revenues of “£2.5 – £3.0m” per year. MAM claims to typically produce annual profit margins of “7% to 9.5%” for its investors.

Traders have been pushed off their stalls as a result, with rent rises for those who remain. For example, after Woking borough council followed Quarterbridge’s plans to relocate its town centre market, only three stalls from the previous market were granted a permanent place in the new site.

In Blackburn, where Quarterbridge managed the relocation of the market to a shopping centre, one trader running a stall for over 50 years said he could not afford the 162% rent rise.

In Doncaster, this January the council unveiled a scheme to hand two markets to MAM in a 25 year lease. Again, the deal comes after Quarterbridge were brought in as a consultant in 2016 to conduct a “strategic review” of the markets. Traders’ rents there will only be guaranteed for a year after the handover – after which “all bets are off”. Opposition councillors demanded the scheme be “called in” for further discussion but the contract is going ahead.

Moving up a league: deal with Places for People

MAM’s market buy-outs require significant investment. In Doncaster, for example, the company has said it will invest £6.2 million over the course of its 25-year contract.

According to the company website, deals are typically funded by “syndicates, individual private investors and niche retail funds” who take “investment lots” of between £500,000 and £5 million. But now MAM has potentially bulked up its financial muscle by bringing in a new partner with serious capital behind it – Places for People.

Places for People is one of Britain’s biggest landlords and property management companies. In 2018, it owned or managed 199,000 properties across the UK, and had a turnover of £754 million. Places for People started out as a “social landlord”, originally founded as North British Housing Association in 1965. But over the last two decades it has grown into a major private sector developer. Around 67,000 of its properties are still “social or affordable” homes, rented out by its various housing association subsidiaries.

Chris Phillips

Places for People’s chairman is a former investment banker called Chris Phillips. He joined the group’s board as an independent director in 2006, becoming non-executive chairman in 2010.

One thing not mentioned in Phillips’ biography on the Places for People website is his involvement in MAM.ⁱ In 2016, Linch and Owen incorporated their new company, Market Asset Management Ltd.ⁱⁱ Alongside Linch and Owen, there was one other director and equal shareholder: Chris Phillips.

Then in January 2018, Places for People bought a 50% stake in MAM Ltd.

We will have to wait for future accounts to see what Places for People has invested so far in MAM’s projects. But presumably Phillips helped bring in the group he chairs as a financial backer for MAM’s market buy-outs.

Although now a profit-making corporation, Places for People still emphasises its “social” mission. It describes itself as “a placemaking and regeneration company that takes a commercial approach to delivering social outcomes”. It says it is committed to “equality and diversity”, and “building strong communities with a sense of togetherness and tackling inequality to create a fairer, sustainable society”.

A quick look at Places for People’s finances shows profits of around £100 million in each of the last two years. The company would do well enough financially without involving itself in Owen and Linch’s ventures. Are other Places for People board members aware of Phillips’ activities with Linch and Owen? And how does Owen’s record of abuse fit in with their company’s commitment to building communities with “a sense of togetherness”?

You can say no

It doesn’t always go Linch and Owen’s way. Campaigners for the Seven Sisters market can take heart from other cases where councils have dismissed their schemes.

Back in 2012, Leeds City Council paid Quarterbridge £12,500 to recommend how the historic Kirkgate market could be developed. The company suggested outsourcing the market’s management and putting tenants through a “reselection process” to hold onto their spots.

The executive councillor for development, Richard Lewis, told the Yorkshire Evening Post he found some parts of the report useful but others “indigestible” – and he “wasn’t that keen on their thoughts about ownership.”

Council leader Keith Wakefield summed up: “We aren’t spending millions of pounds to lose it to a private company. It will remain in council ownership.”

Last year Rochdale Borough Council terminated Quarterbridge’s contract to run their new Riverbank market. A council spokesperson said Quarterbridge had been “unable to meet our expectations”. This was in spite of being given “significant additional help and support” and “numerous opportunities” to prove they were “the right people to run our cherished market”.

A later council document simply said “Quarterbridge have been removed from the market after underperformance”.

The post Quarterbridge-MAM: meet the companies waging ‘f***ing war’ on local markets appeared first on Corporate Watch.

Right now the vast majority of private landlords are small scale, ‘buy to let’ operators. But there’s a new game in town: ‘build to rent’, which sees corporations construct housing to let out rather than sell, attracted by the rent they can charge tenants.

Leading the way is Grainger, one of the UK’s biggest private landlords. Right now it rents out over 8,000 homes but plans to at least double that number. Just this week Grainger was chosen by Transport for London to build 3,000 homes around eight tube stations in a lucrative joint venture.

As Grainger grows, its developments have provoked resistance from housing groups fighting gentrification. Local residents and traders in the London borough of Haringey, for example, are currently trying to stop its controversial scheme to demolish the Latin American market in Seven Sisters, to make way for private flats and a new “redeveloped” market.

So far such campaigns have focused on the councils allowing Grainger’s schemes to go ahead. Here we’re looking at the company itself: how is it trying to make money, how much is it making, who’s running it and who’s profiting? In brief:

• Grainger is run by CEO Helen Gordon, a key player in one of the biggest banking scandals since the financial crash. From 2011, Gordon was head of the ‘West Register’ division of RBS, accused of buying up properties on the cheap from businesses the bank itself had run down.
• Grainger’s biggest shareholders are hugely wealthy financial institutions, with BlackRock – the world’s biggest investment firm – the top shareholder.
• Record profits have helped Grainger pay out huge sums to its bosses and owners. Gordon made £1.5 million last year, while the company has paid shareholders £55 million in dividends in the last three years.
• Grainger has received substantial state backing for its new strategy. The government has changed planning regulations and spent £4.5 billion to support the build to rent sector. Local authorities have given Grainger grants, loans and legal support, while bodies such as Transport for London and Lewisham council have set up joint ventures with the company.

Click here to find out more about the campaign to save the Latin American market. And click here to read our case study of Grainger’s Besson Street development with Lewisham council.

Click on a link to skip straight to the relevant section:

• ‘A vast market opportunity’;
• Who’s in charge?;
• Helen Gordon and the West Register controversy;
• Shareholders;
• Where’s the money?;
• Political networking;
• Build to rent: how to profit from a nation of renters;
• Regulated tenancies;
• Moving into “affordable” housing;
• Upcoming developments

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

‘A vast market opportunity’

Grainger is the UK’s biggest “listed” landlord – meaning it is the biggest one that lists its shares on the stock market. The company currently rents out 8,000 homes, with another 5,000 currently being built.

Based in Newcastle, the company has historically had a number of different business areas but since 2016 has changed its focus to concentrate on the private-rented sector. The company sold off its German residential venture, plus its ‘equity release’ division for older homeowners, and is gradually selling off the ‘regulated tenancies’ that have historically been the main part of its business (see below).

Until very recently, the UK’s “private rental sector” was smaller than in many other European countries. But this is now changing rapidly, with private renting becoming the fastest growing part of the housing market. A whole generation can’t afford to get on “the housing ladder”, while affordable social housing is being consigned to history. Millions of people now have no choice but to rent from private landlords.

So, although Grainger has been around since 1912, this is its big moment. In what it calls a “vast market opportunity”, Grainger expects the private rental market to jump from 4.7 million households now to 7.2 million in 2025.

To take advantage, the company is set for a rapid expansion, planning massive new “Build to Rent” tower block developments in cities from Leeds to London. Grainger is hoping its developments will add to already record profits (£87 million in 2018). Described by the Daily Mail as “American-style complexes” Grainger developments contain services from “concierges, cinema rooms and gardens to broadband and gyms”.

Gym in a Grainger development, graingerplc.co.uk

Like other major housing companies, Grainger shows little concern for affordable, much less social, housing. Flagship developments like Clippers Quays in Manchester and the Seven Sisters Regeneration (‘Wards Corner’) in London contain no affordable housing whatsoever. Those that do, like the Besson Street development in Lewisham, mainly offer homes at “intermediate” or “affordable” rent – which is up to 80% of the market rate – rather than social housing. As such, they are aimed at “middle income households” rather than those on council waiting lists.

Yet Grainger management are doing their best to present their company as a solution to the housing crisis. Chief Finance Officer Vanessa Simms says private renting “can be a real catalyst to address the housing crisis”. Her company has also championed calls and sponsored reports from the charity Shelter for a more responsible private rental sector, arguing action should be taken against “rogue landlords”.

Management have made great play in the media of their long tenancies – signing a pledge to offer three year terms – and their tenants not needing to pay a deposit.

But there’s a financial incentive to all this. In the words of Vanessa Simms, the company’s whole strategy is “to be the UK’s leading landlord, by professionalising the private rented sector”. All of the measures involved in this “professionalisation” help to bring Grainger steady returns and price smaller operators out of the market.

Longer tenancies, for example, give renters more security, no doubt, but they also give the company the steady returns its investors find so attractive. And as Simms says, they are beyond the reach of most smaller, buy-to-let landlords, who “can’t usually do more than 12 months because of banking requirements”.

Above all, Grainger’s ideal market is one in which rents keep going up. As CEO Helen Gordon told the BBC:

“We have in the UK a housing shortage. We know that more people will be renting for longer periods of their lives, and unlike shops and offices we will have a constant demand for occupation.” Plus rents usually rise with inflation and wages, so for an investor, it’s quite a good hedge against inflation.”

Grainger has significant government backing for its new policy. An announcement to the stock market by the company described how “recent changes to the tax system and by the Bank of England on buy-to-let lending requirements” have been “disadvantageous to the small, buy-to-let landlord sector” but have encouraged investment by “large-scale investors and operators”.

According to Grainger, since 2012 the government has put down £4.5 billion to support the Build to Rent sector and “changes have been made in the planning system to enable greater number of Build to Rent developments to take place”.

This is a key moment for Grainger. Its future plans are all about its swanky new build to rent developments but the majority of its profits still come from the far more dour, somewhat morbid, “regulated tenancies” that it owns (see below). They are slowly reducing and Grainger needs its new strategy to be a success, so its investors can get the returns they demand.

Who’s in charge?

At the very top, Grainger is led by property industry veteran Helen Gordon, CEO since 2016.

Her work is overseen by chairman Mark Clare, former chief executive of giant housebuilder Barratt. He also currently serves as a director of bookies Ladbrokes Coral and privatised water company United Utilities. Other board members come from across the corporate world (for more information you can read their profiles on the Grainger website here).

Gordon has led the transformation of Grainger to become a leading player in the ‘build to rent’ boom. She also faced down the challenge from hedge fund Crystal Amber, which unsuccessfully tried to force a takeover of the company.

Company accounts show Gordon earns a tidy sum for her work at Grainger: she made £1.5 million in 2018, up from £1 million the year before. Almost half a million of this came as a bonus, plus over £300,000 in share awards. Gordon’s pay packet was given almost unanimous approval at the 2019 Grainger Annual General Meeting, as was her re-election as CEO. Shareholders also stumped up £347 million last year to back her plan to expand the company (more details below).

Grainger CEO Helen Gordon, graingerplc.co.uk

So Gordon seems to be very much in charge. Her public profile is one of a savvy, yet caring, manager, who genuinely takes an interest in the lives of her tenants. She told the Sunday Times when she joined Grainger that she saw the company’s properties “as people’s homes, not pieces of real estate, and that makes it very important.”

Helen Gordon and the West Register controversy

Dig a little deeper though, and Helen Gordon has been involved in some pretty sharp corporate manoeuvrings. She joined Grainger after five years at RBS where worked as head of the bank’s ‘West Register’ property division from July 2011.

In the wake of the 2008 financial crisis until it was shut down amid controversy in 2014, West Register played a key role in one of the biggest banking scandals since the crisis.

RBS is accused of deliberately running down businesses it was lending to, then buying up their assets on the cheap. Businesses identified by the bank as in need of “restructuring” were sent to the now-notorious Global Restructuring Group (GRG), to be hit with huge fines, fees and hiked up interest rates. Finding themselves in more trouble than before – some were made insolvent – the businesses then had to sell property and other assets.

This was where West Register came in, often buying up that property at a knock down price. A 2013 report by the government’s “entrepreneur in residence” Lawrence Tomlinson described businesses who:

“believe their property was purposefully undervalued in order for the business to be distressed, enabling West Register to buy assets at a discount price. A number of businesses complained about West Register’s interest in their property and felt they had been forced into a corner where they had to accept conditions they otherwise would not.”

RBS has denied West Register profited by buying assets cheap and selling them on for an inflated price. But internal audit documents from June 2011 state the division aimed to “extract maximum economic value” from selling the properties it had bought from “distressed situations”. And that these sales could “often result in a capital gain in relation to the original property acquisition and may represent upside return to the bank”.

Gordon joined the next month, with the scheme in full flow. West Register appears to have grown under her. Internal documents show the division owned properties worth £2.3 billion at the end of 2010. By the end of Gordon’s first year in charge that had increased to £3.2 billion.

Gordon’s role has not been examined in any detail. Media reporting has focused on the operation’s founder and overall head Derek Sach, as well as RBS’ top management and the government regulators overseeing the running of the state-owned bank.

But she appears to have been an important player from the time she joined. She is named as a “senior leader” in an internal document that sets out the GRG’s governance structures.

One of a number of files leaked to the BBC and Buzzfeed in 2016, the “High Level Controls Document”, names Gordon as one of only three members of the GRG’s Asset Purchase Committee. Gordon also held the position of the committee’s “alternate chair”. There, together with GRG supremo Derek Sach and overall head of property Aubrey Adams, Gordon signed off RBS bids to buy properties from the bank’s “distressed” borrowers.

Collaboration between the GRG’s restructuring and property divisions has been one of the key allegations levelled at the scheme. RBS always claimed the divisions were separate and that West Register was buying properties from troubled businesses independent of the restructuring processes the GRG had put them in.

But Gordon, Sach and Adams were also involved in GRG’s management committee. This body had authority over the day to day management of the whole operation, and over which businesses were transferred into the restructuring unit. Derek Sach and Aubrey Adams were permanent members of the management committee. Gordon is named as one of the “senior leaders” who “from time to time” also attended.

Among the leaked documents was West Register’s own Policy & Procedures Manual, dated April 2011, just before Gordon joined. It shows that West Register could be given information by GRG that was not available to other companies bidding for the properties. And that properties could be sold to West Register without being advertised on the open market.

Though it denied the worst of the allegations, RBS wound down West Register in 2014, acknowledging there was a “damaging perception” surrounding the way the division operated. The top bosses left but Gordon stayed on at the bank as the global head of real estate asset management.

And then she got the call from Grainger.

Shareholders

Grainger is a ‘publicly-listed’ company, meaning you can buy and sell its shares on the stock market. As is common with companies of its size, most of Grainger’s shares are owned by large investment funds, none of which individually own anything close to a majority that would allow them to control the direction of the company’s business by themselves.

At the time of writing, the top ten shareholders are:

1. Blackrock (9% of shares held)
2. Aberdeen Standard Investments (6%)
3. Schroder Investment Management (5%)
4. Vanguard Group (4%)
5. Columbia Threadneedle Asset Management (4%)
6. Norges Bank Investment Management (4%)
7. M&G Investment Management (3%)
8. Legal & General (3%)
9. Aberforth Partners (3%)
10. Highclere International Investment (3%)

Top shareholder Blackrock is the world’s biggest investment fund, managing more than $6 trillion of clients’ money. It has made a lot of people very rich – most notably its CEO Larry Fink who last year was proudly crowned a billionaire.

Blackrock CEO Larry Fink at the New York Stock Exchange in 2017

These firms own shares in most of the companies that trade on the London Stock Exchange, for the most part playing no more than a passive role in their affairs. They are motivated by financial returns above all else and are unlikely to be bothered by local residents’ concerns over the impact of Grainger’s developments. One possible exception is Norges Bank – the central bank of Norway – which has previously divested from companies it decided did not meet its ethical standards, though these have mainly been involved in fossil fuel extraction, repression or the arms trade.

Grainger’s shareholders appear to be fully supportive of the company’s direction under CEO Helen Gordon. Last year they stumped up £347 million to help the company buy up the ‘GRIP Reit’ property investment trust. Grainger previously owned just a quarter of the trust – which contains 1,700 UK homes worth £696 million – with the rest held by Dutch pension fund APG.

What do they get in return? Annual dividends (the jargon for cash payouts to shareholders) of course. Historically these have not been particularly big by housing industry standards. Grainger paid out between £3 million and £8 million to shareholders each year between 2003 and 2013. But under Helen Gordon’s reign, and since the shift to ‘build-to-rent’ they have been getting bigger: £55 million in the last three years, with £21 million paid out in 2018.

But such returns do not compare to what shareholders would be making in dividends from property industry leaders such as Bovis or Barratt (which pay out more dividends in relation to their share price). The attraction to Grainger for shareholders instead may be the hope that the price of their shares will rise if the ‘build-to-rent’ strategy succeeds as intended.

Where’s the money?

Grainger is one of the 350 biggest companies in the UK that list their shares on the London Stock Excahange (where Grainger is part of the FTSE 250 index). The stock market values Grainger’s shares together (its ‘market capitalisation’) to be worth £1.5 billion at the time of writing. That’s around the same size as property industry rival Bovis Homes, but far below industry giants Barratt (£6 billion) or Persimmon (£7 billion).

Grainger’s business brought in revenues of £270 million in 2018, the date of the last published financial statements. The majority of this – £148 million – was from sales of their regulated tenancies (see below). Another £62 million came from housing development, mainly through a scheme in the London borough of Kensington and Chelsea, where Grainger managed and constructed a scheme for the council. Then there was rent: £59 million coming from rent paid by the company’s tenants, split roughly equally between money received from regulated tenancies and the ‘private-rented sector’ (see below).

Its rental division is proportionally the most profitable part of its business: netting the company £44 million in 2018, compared to the £80 million profit made from selling properties. No surprise then, that Grainger is looking to increase this part of the business so quickly.

After all costs and tax were taken off, the company made an overall profit of £87 million in 2018, the biggest in its history.

As of September 2018, the date of the last accounts, Grainger owned properties worth over £1.5 billion. This did not include the properties brought into its portfolio with the acquisition of the GRIP Reit, described below.

On the other side of its balance sheet, it owes £961 million to creditors it has borrowed from. The majority of this – £533 million – is from unnamed banks, with another £346 million from unnamed investors in the bond markets. Another £75 million came from the insurance company Rothesay Life Plc. All these lenders receive interest from Grainger of between 1.5 to 3% a year, totalling £27 million in 2018.

Take off everything it owns from everything it owes and Grainger ‘net worth’ in its accounts is £816 million. Residents campaigning against Grainger’s schemes should not expect the company to go bust anytime soon.

Political networking

As Helen Gordon says, Grainger’s “access to future opportunities is increasingly coming through partnerships with local and central government”.

Much of its lobbying at the national level is done by trade association body the British Property Federation. But Grainger does some by itself too. The company buys politicians nice lunches,* sponsors Ministry of Housing events and councillors’ trips to swanky Cannes property conferences. To be fair, Grainger also made homes available to Kensington and Chelsea council after Grenfell “at fair value”, according to Helen Gordon.

No doubt its powerpoint proposals to win developments are excellent too. As well as being granted permission to build, often with little requirement for affordable housing, Grainger also benefits from councils’ support, such as Haringey council pushing on with a Compulsory Purchase Order to acquire the Wards Corner site for the company.

Wards Corner Community Plan for alternative to proposed Grainger development, savelatinvillage.org.uk

Grainger also receives direct financial support from the state. Three examples: a £6 million grant from the Greater London Authority when Boris Johnson was Mayor; an £8 million loan from the Homes England agency; and a £1.5 million loan from the New Deal for Communities programme.

Build to rent: how to profit from a nation of renters

Until very recently, private renting in the UK was only a small part of the housing market, well behind other European countries. In 2001, out of 21 million homes in England, only 2.1 million were rented from private landlords.ⁱ This compares with just under 15 million “owner occupied” – or, more precisely, occupied by people paying mortgages. 4.2 million households lived in “social housing”: 2.8 million council homes, and 1.4 million rented from “private registered providers” such as housing associations.

The picture is changing fast. Looking at 2017, the number of “owner occupiers” has hardly changed – just a little over 15 million. Social housing stock has dropped to just 4 million, and now only 1.2 million of those are council homes. But the biggest change is the rapid growth of private renting: there are now 4.8 million households paying rent to private landlords.

There are two obvious big factors here. On the one hand, massive house price inflation means new generations can no longer afford to get mortgages and get “on the housing ladder”. On the other, there is nowhere near enough “social housing” to meet the need. Although some is being built, the numbers are still small. Meanwhile, council homes are still being lost to “right to buy” sales and estate demolitions, as councils sell off valuable land for private developments.

The result is that millions of people who might once have either found a secure council home or bought into the Thatcherite dream of a “property owning democracy” are now forced into renting from private landlords.

In what it calls a “vast market opportunity”, Grainger’s management expect the private rental market to grow even faster in the next few years – reaching 7.2 million by 2025.ⁱⁱ And with the vast majority of the UK’s landlords being small, owning just a few properties, Grainger believes it can use its “economies of scale” to grow rapidly, designing well-facilitated apartments with gyms and concierges, and giving tenants longer tenancies than the norm.

As CEO Helen Gordon told the Sunday Times: “The majority of people today rent from a landlord who has under four properties, so you are at the whim of that person’s need to get their property back.” Grainger, on the other hand, will let on up to three year leases.

According to the Financial Times, the acquisition of the ‘GRIP Reit’ portfolio, described above, means that the value of Grainger’s homes rented out at market-rate now exceed those on regulated tenancies. Even before that Grainger was the UK’s biggest ‘private rented sector’ landlord, with 4,548 homes. The company’s annual report boasted its nine biggest competitors had just 10,500 homes between them. Now, its focus is bulking up fast with a rash of big new-build developments.

Grainger presents its current plans to investors in a presentation released in November 2018, called “Accelerating our Growth Strategy”. Here Grainger says that it has a “development pipeline” of schemes worth £1.37 billion, with 5,266 new “units” (homes) planned between now and 2022.

The key strategy is to build big new “build to rent” developments focusing in “key cities” – which it identifies as having both “strong demand” and “growth prospects”. London is clearly top of the list on both counts, but there are other target cities including Birmingham, Manchester, Bristol, Southampton, Leeds, Brighton, Milton Keynes, Sheffield and Liverpool.

Grainger’s planned Apex House development in Tottenham, London, graingerplc.co.uk

The investor presentation lists what it calls 19 new “high quality PRS” schemes “in the pipeline”. Together these schemes, which come with free wifi and on-site gyms as standard, many with relatively long tenancies, represent over 4,000 homes, and will be completed between 2019 and 2022. Scroll down to the bottom for a list.

Grainger is particularly proud of its Clippers Quay development in Salford. This is the biggest “build to rent” development so far to be built outside London. The first phase was recently finished at the start of 2019, but even before this flats were available to view using “virtual reality”.

Some of these projects will have the first flats to let in “early 2019”, with others not expected until 2021. Only one, Besson Street in Lewisham, is expected to take longer – it is listed as “late 2022”.

Many of the schemes are built on a “forward funded” model – i.e., Grainger buys the land and raises the finance for the scheme, but then pays another development company to be in charge of the work. Grainger takes over and manages the properties once the development is complete.

However, the current run of deals have been dwarfed by Grainger being selected as Transport for London’s preferred joint venture partner in “Build to Rent” schemes on land around eight tube stations. In this first phase of of TfL development plans, Grainger will build 3,000 flats on the sites, with 40% for “affordable rent”.

Regulated tenancies

The headlines, and Grainger’s own publications too, focus on big shiny new “Build to Rent” developments. But the core of the business for the moment remains a less glamorous, even somewhat morbid, line of work: renting thousands of flats scattered around the UK to mainly old people on “regulated tenancies” – then waiting to sell off these homes when they die.

Regulated tenancies were once the norm in the private rental market, but are now largely forgotten. They are private market tenancies, not “social” or so-called “affordable” ones. Yet they offer lifetime tenancies, and rents are regulated as “fair” by the government’s Valuation Office Agency. Abolished by the Thatcher government in 1989, they seem now like remnants of a vanished era before the dogma of unregulated markets took complete hold.

Although no new regulated tenancies have been issued since 1989, there are still 100,000 or more in existence. The holders are now largely elderly: Grainger’s regulated tenants have an average age of 76.

While the tenancies may last a lifetime, landlords can buy and sell on these homes with “sitting tenants”. Grainger is one of the biggest players in this market, having accumulated a portfolio of several thousand properties with regulated tenancies, many from state industries such as the National Coal Board and British Rail.

There are three crucial points about investing in this market:

• First, rental income is very stable – secure long term tenancies mean there are no “voids” between tenants, and rents will often be covered by housing benefit. So the landlord is guaranteed a constant income stream.

• Second, because there are sitting tenants, these homes sell for some way below the normal market price.

• Third, because the tenants are largely elderly, after a few years many die (“41% of vacancies arising from mortality”) or move into old people’s homes (25%). The houses are then free to sell at the normal price.

So, to sum up, Grainger buys up the houses cheap and gets several years of reliable rent coming in. Then, when the tenants “vacate”, it can sell on the houses at the full market rate, making for a tidy profit.

In the language of Grainger’s annual report, this strategy is called “selling properties on vacancy, crystallising the reversionary surplus”. The company says that “Sales of properties on vacancy [are] expected to continue at between 6-7% per year of the portfolio, with average tenant age of 76.” The reliable income stream this generates is liked by Grainger’s investors, and “provides funds for reinvestment in the PRS portfolio” of profitable new developments. (Annual Report p2).

Moving into “affordable” housing

Once, the large bulk of “social” or “affordable” housing in the UK was provided by local councils. A first big shift came in the 1980s and 1990s, when the Thatcher and then Blair governments stopped councils from building, and pushed them to sell off their housing stock to the growing Housing Associations.

Now, another big step is taking place in the privatisation of public housing. The Housing and Regeneration Act 2008 for the first time allowed profit-seeking companies to become “registered providers” of affordable housing. Companies like Grainger can now compete with councils and “non-profit” charities to build social housing schemes.

The new law came into force in 2010. In 2012, Grainger became one of the first dozen or so entrants into the market, registering its new “affordable landlord” under the name Grainger Trust.

As of its 2018 Annual Report, Grainger says that its “affordable homes portfolio has 289 homes in operation and 623 in the pipeline.”

So this is only a small part of the business – and affordable homes will generally be less profitable than renting at full market rate. But having a “registered landlord” subsidiary can bring some important advantages. It can bid for government grants to build new affordable housing; and can also try to grab “planning gain” (Section 106) money which for-profit developers are meant to give to support affordable housing and other local resources.

In addition, although “affordable housing” brings in less absolute profit than private rent, it has some advantages. Like the regulated tenancies discussed above, affordable rents are generally very stable income sources. Tenancies are long, and the rents are often covered by housing benefit. As regulated tenancies (literally) die out, an affordable portfolio helps keep up a stable income flow. This reassures investors and keeps interest rates low when Grainger borrows to fund new developments.

Upcoming Grainger developments (numbers of “units” planned in brackets):

London: Besson Street, Lewisham (c.300, 50/50 joint venture with Lewisham Council); Waterloo Estate, Lambeth; Pontoon Dock; Hale Wharf, Tottenham, Haringey (108); Apex House, Haringey (163); Seven Sisters, Haringey (196).

Southern England: Finzels Reach, Bristol (194); Market Street, Newbury (232); East Street, Southampton (132); Berewood, Hampshire (104); Gunhill, Welleseley, Hampshire (107 – on former Aldershot military barracks, part of a long term plan for more than 3,000 homes on the site); Silbury Boulevard, Milton Keynes (139); YMCA, Milton Keynes (261).

Midlands: Gilders Yard, Birmingham (156). (Plus in December 2018 Grainger announced another Birmingham scheme, Exchange Square with 373 homes.)

North West: Gore Street, Manchester (375); Clippers Quay, Salford (614).

Yorkshire: Eccy Village, Sheffield (237); Yorkshire Post building, Leeds (242); another unnamed development in Leeds (200+).

The post Grainger: the corporate landlord cashing in on the housing crisis appeared first on Corporate Watch.

Besson Street in New Cross is the target for Lewisham Council’s first foray into the “private rented” market, working in a 50/50 joint venture with private developer Grainger PLC (see our profile here). Together they are building homes to rent at market levels, on the site of demolished council homes.

Lewisham has been eyeing the site to try out private rental development since at least 2015. In 2018, it chose Grainger as its partner, and the two registered a joint venture company called Lewisham Grainger Holdings LLP. According to Grainger’s website, the development will be owned by the new joint company, but Grainger alone will be in charge of managing the rented housing.

There will be “between 250 and 300” flats. Not one will be for “social rent”.

The majority will be rented at private market levels, with 81 at “London Living Rent”. This is an “intermediate” rent level defined by the Greater London Assembly. Set at roughly around two thirds of market rent, the GLA sees it is directed at “middle income households” rather than those on the council waiting list.

A planning application is expected in “Summer 2019“. Currently, the council/Grainger partnership is running local consultation meetings and has set up a “consultation portal” where people can place comments.

The scheme will also include a health surgery, office, and “outdoor gym” run by the New Cross Gate trust. This is a local charity which is backing the scheme and is involved in managing the consultation process. The trust was originally set up as the management organisation for the New Cross New Deal for Communities (see below). It is part-funded by the Council, and sees the scheme as a main source of its future income.

What they don’t say ..

But what is the Besson street building site? On its website, Lewisham says: “the site is brownfield and has been lying derelict for the last 10 years.”

Like many official statements, this may be technically true, but also manages to hide some pretty important facts. Before it was demolished for a previous failed development scheme, this was the site of a public housing estate containing 69 council homes.

The homes were demolished in 2007 as part of the government funded New Cross “New Deal for Communities” regeneration scheme. The scheme planned a new “mixed use” development including a community cafe, library, gym and health surgery as well as housing. But then came the 2008 crash, and the plan collapsed due to funding problems. It has, indeed, been sitting empty since then.

Although the original New Deal scheme had many more community amenities than the new proposal, it was hardly ideal either. In 2008, the Greater London Authority (GLA) report on the “New Deal” plan criticised it for a loss of “social rented” units: just 41 were planned, as opposed to the 69 council houses demolished. The GLA warned it could recommend rejection of the development if this situation wasn’t improved. As the development collapsed soon after, that was never put to the test.

Now the new plan includes no “social rented” homes at all. In short, a pure loss of 69 council homes, without any mention or apology. The council seems to hope a ten year delay means no one will notice.

Why is Lewisham council becoming a private developer?

But what is a local authority doing getting mixed up going in the private development business at all? First, we should note that Lewisham is far from alone in taking this step.

In recent years, numerous councils in London and across England have been setting up new for-profit housing development companies. They were given the power to create these “arms-length developers” by a 2011 law called the Localism Act. By the end of 2016, according to a report by the Architects Journal, 98 councils had set up private development companies or were considering doing so – over a quarter of all councils in England. To clearly distinguish themselves from public housing, the companies often have corporate-sounding names like Red Door Ventures (London Borough of Newham), Brick by Brick (Croydon) or WV Living (Wolverhampton).

The big driver behind this trend is that councils can use these companies to borrow money on private markets. Since the 1980s, both Conservative and Labour governments have imposed strict controls on public borrowing, and particularly on local authorities’ finances. This attack on council spending was initially pushed with Thatcherite rhetoric about “private sector efficiency”. That line may seem hardly believable nowadays, but the recent focus on “austerity” economics has a similar impact.

Far from traditional council housing, the houses these companies build are typically for private sale or rent at market levels. The argument is that councils can plough the money they make from private developments back into “social housing” and perhaps other public services. This is how Lewisham explains the Besson street scheme in a post on its website:

“As a private development, this project will provide us with a long-term, sustainable and reliable income stream. This income will help us to:

• manage our budgets

• provide essential services

• make less cuts to services because of government funding cuts.”

However, there’s little to confirm whether any of this money will ever make it to pay for social housing – or other “essential services”. One thing to flag up: of the 15 development schemes we have surveyed in New Cross and Deptford, not one involves any actual “social rented” housing at all. The council may claim it’s still committed to building “social” homes – but somehow, they always end up being promised somewhere else.

All this shows that instead of tackling the housing crisis, as they claim, Lewisham and other London councils are in practice accelerating the gentrification of London’s neighbourhoods.

The post Besson St: Lewisham council and Grainger building private flats on demolished council estate appeared first on Corporate Watch.

Waterstones staff are demanding to be paid the living wage. Management say the company can’t afford it but an investigation by Corporate Watch has found:

• Waterstones’ new owner – US hedge fund Elliot Advisors – has set up an offshore financing scheme that could see it make £17 million a year from the bookseller.

• The highest paid director’s £1.6 million pay packet is over 100 times more than staff on the minimum wage receive.

• Elliott Advisors is a notorious ‘vulture fund’, chasing the debts of crisis-hit countries like Argentina. It is run by Paul Singer, a US billionaire and major conservative donor who has funded Donald Trump, George W Bush and the Koch brothers.

In short, Waterstones sums up capitalism in Britain today: billionaire owners and millionaire executives living off a workforce on poverty wages.

We put all the points below to Waterstones. It did not dispute the figures but a spokesperson said: “we pay our booksellers as much as it is prudent to do, with a particular commitment to a progressive pay scale” (you can read the full statement below).

How much would it cost?

In response to a petition from staff, backed by prominent authors, Waterstones Managing Director James Daunt said the company was “simply not profitable enough to wave the magic wand and shower gold all around”. He explained:

“If you raise the bottom level really significantly, then everybody all the way up the company has to go up, and then we go bust, which isn’t very helpful”.

To assess this claim, let’s start by estimating roughly how much paying the living wage would cost Waterstones.

The latest Waterstones accounts show the company paid its 3,000 employees a total of £56 million in 2018. Let’s accept Daunt’s point that pay scales should rise proportionally all the way up the company and say they’d go up by 10% across the board (the difference between minimum wage of £8.21 an hour and the living wage of £9).

That means the company would pay staff around £6 million a year more. Let’s be generous to the company and bump that up to £7 million, given its London staff would get the London Living Wage of £10.55.

Waterstones made £16 million profit after tax in 2018, down from £18 million in 2017. Take that £7 million off, and those profit figures remain healthy at £9 million and £11 million respectively.

It’s true the company faced bankruptcy a few years ago and Amazon isn’t going away anytime soon. So Waterstones’ management want to keep a healthy profit margin while times are good. But look closer at those profits and they would be even higher were it not for annual payouts being made to the group’s owners.

Showering the gold

Last year, Waterstones was bought by US-based hedge fund Elliott Advisors from the previous owner, Russian billionaire Alexander Mamut (who has retained a minority stake in the company).

No accounts have since been published but company records show the kind of sums that Elliott plans to extract from the company.

A note at the end of the latest available Waterstones accounts filed with Companies House says the hedge fund is investing in Waterstones by lending it £60 million. It is presumably also putting money into the company’s shares (or ‘equity’ in the jargon) but details of this are yet to be published.

Elliott is lending that money to Waterstones at an interest rate of around 7%. A simple calculation estimates Waterstones will have to pay out around £4 million a year in interest as a result.

Look at previous years and Mamut had also put money into Waterstones through loans at roughly the same interest rate. In 2018, Waterstones paid £4 million out as interest on loans to companies also controlled by Mamut, with £5 million in 2017 and £6 million in each of the two years before that.

Without such big payouts to its owners, Waterstones’ profits would have looked even healthier: £20 million last year and £23 million in 2017. This would have given the company a lot more financial wiggle room to increase staff pay.

Alright at the top

Where else could savings be made to enable to afford the living wage staff demand?

Waterstones’ accounts show two directors between them made £2 million in 2018. The highest paid director – presumably Daunt – alone made £1.6 million from the company last year, up £170,000 from the previous year. This is over 100 times more than a full-time Waterstones worker on the minimum wage will bring home. One director – again, presumably Daunt – was also paid a bonus of £1.2 million (read more on this from author Chris McCrudden here).

Given Daunt has said those demanding living wage are “preach[ing] to the converted”, would he or his colleague at the top be able to survive on a meagre £600,000 a year from now on?

If so, let’s do a quick back of the envelope calculation: throw in a million a year from the boss’ salary, accept slightly lower profits, stop paying out £4 million a year to owners and £7 million a year doesn’t seem so unaffordable.

James Daunt, waterstones.com

A quick caveat before we move on: at least some of the interest paid to the Mamut companies appears to have been used to pay off loans those companies were themselves taking from banks or other third parties. So not all of that will have been profits enjoyed by Mamut.

It’s hard to know the full details of where the money went under Mamut because he ultimately owned Waterstones through a company registered in the British Virgin Islands, as the last page of accounts downloadable here explain. The BVI is a so-called ‘secrecy jurisdiction’ as well as a tax haven, which does not require accounts to be disclosed. If you work for Waterstones and want us to look into this in more detail, get in touch.

But Waterstones’ new owners are aiming to pocket all of the £4million set to be paid out to them – and, as we will see below, much more.

The magic wand of finance

Why is Elliott investing its money as loans? Why saddle your own company with annual interest payments?

Until the next set of accounts come out we won’t know for sure what’s going on. But the latest we have say Elliott Advisors have set up two shell companies to manage their investment in Waterstones – the catchily-titled Book Retail Bidco Ltd and Book Retail Investco Ltd, which is based in Jersey.

We’ve found Book Retail Bidco is also racking up debt – but this time through the International Stock Exchange in the Channel Islands.

A listing there shows Book Retail Bidco Ltd has issued £129 million in bonds with a whopping 13% interest rate. This looks a lot like the quoted Eurobond dodge we’ve covered before: these bonds will be bought by other companies owned by Elliott. The money Book Retail Bidco received from this will be invested in Waterstones. We’ve already seen it has lent it £60 million so the other £70 million may have been invested in shares.

Book Retail Bidco will either pay out interest on the bonds to the other Elliott companies in cash every year or, more likely, ‘accrue’ it, to be paid out at a later date.

Either way, every year this interest gets taken off the UK profits of both Book Retail Bidco Ltd itself and the corporate grouping it is part of, which includes Waterstones. As a result the total tax bill of the Waterstones business is slashed, while its owners, thanks to a legal loophole called the quoted eurobond exemption, enjoy tax free payouts.

And what payouts: 13% of £129 million amounts to around £17 million a year. The Financial Times reckoned Elliott plans to bulk Waterstones up for a few years (for example through the recent acquisition of Foyles) and then sell it to the highest bidder. If so, expect the interest to accrue each year, to be paid out as part of the price Elliott – if successful – sells the company for.

A price which, let us not forget, will be thanks to the hard work of the staff currently being paid less than the living wage.

All the way up

Who’s ultimately benefiting from all this? Step forward Elliott founder and billionaire “vulture capitalist” Paul Singer, described by the Independent as “a pioneer in the business of buying up sovereign bonds on the cheap, and then going after countries for unpaid debts.” Targets have included Argentina, Peru and Congo-Brazzaville, who a company of Singer’s successfully took to court for $39 million.

Paul Singer, elliottmgmt.com

A long-term Republican, Singer has donated millions to, among others, George W Bush, Rudy Giuliani, and the Koch Brothers – whose foundations and think tanks push right-wing causes such as low taxation for the wealthy.

Another of Singer’s causes is, you guessed it, Donald Trump. Initially an anti-Trump guy, Singer quickly changed his tune after the presidential election, giving $1 million to Trump’s inaugural committee.

We put all the points regarding finances and future payouts to Waterstones and Elliott Advisors for comment. A spokesperson from Waterstones said:

“We have answered the petition directly, noting that we pay our booksellers as much as it is prudent to do, with a particular commitment to a progressive pay scale. The retail high street is under extreme pressure, with many highly respected companies closing, and many more in dire straits. Having come close to bankruptcy ourselves, we understand acutely the need for proper prudence. We are fortunate now to be able to invest sensibly in new shops, in refurbishments, in logistics and, above all, in our booksellers. In doing this, we are building a solid business for the future, perhaps not with as fast progress on pay as you wish but – in today’s world – the tortoise is likely to beat the hare.”

The post Waterstones paying millions to US ‘vulture fund’ owners while denying staff living wage appeared first on Corporate Watch.

Cleaners, security guards, catering staff and other workers at the University of London are campaigning to be directly employed by the university, rather than through outsourcing companies. University management says it cannot afford the extra costs that would involve. But a Corporate Watch investigation has found:

• the university has substantial cash reserves, with £45 million in the bank.
• financial problems used by management to argue against in-housing have been a direct result of their own expansion strategy.
• many of the staff at the consultancy chosen to review the costs of in-housing used to work for outsourcing companies.
• the university has refused our Freedom of Information request for a copy of that review. Similar reviews by other universities found in-housing would not be significantly more expensive.

We put our findings to the university. They did not dispute the figures but said the issues involved were “very complex” (full statement below).

University of London 2019 graduation, www.london.ac.uk

‘The dignity we deserve’

Around 250 staff working at the University of London are currently employed by four outsourcing companies rather than directly by the university itself.

The majority of outsourced staff are represented by the Independent Workers of Great Britain (IWGB) union. They say the jobs must be brought in house for two main reasons: workers are employed under worse conditions than in-house staff, with “worse pensions, holiday pay and sick pay entitlements”; and face “bullying, discrimination and illegal deduction of wages”.

The centrepiece of the campaign has been the boycott of the landmark Senate House library building. According to cleaner Margarita Cunalata: “We will continue fighting until we are made direct employees and treated with the dignity we deserve.”

Senate House, www.london.ac.uk

In response, the university management have agreed to bring around 35 audio-visual, front of house, post room staff and porters in house (just over 10% of the total outsourced workforce). They have also pledged to stop anyone being employed on zero hours contracts, another initial campaign demand. But there has been no commitment to directly employ the rest of the workers, merely a promise to review all outsourcing contracts by spring 2021.

The companies profiting from university outsourcing

Four different outsourcing companies are involved:

– Catering staff are employed by Aramark, a huge multinational food service company based in the US.

– Cleaners, security, audio-visual, porters, reception and post room staff by Cordant Group, a UK outsourcing firm.

– Gardeners by Nurture Landscapes, a “horticulture, landscape and grounds maintenance business”.

– Maintenance staff by Bouygues, a multinational construction, development and telecoms company based in Paris.

The university argues that outsourced staff benefit from “job flexibility” and from higher take home pay as they have to make comparatively lower pension contributions.

They also say employing staff directly will be too expensive. In a statement to university staff, vice-chancellor Peter Kopelman said analysis commissioned by the university showed bringing staff in house would cost substantially more “at a time when we are currently projecting an operating budget deficit for this academic year”.

This is what we’re looking at here. The key question is not whether outsourcing costs the university less – it may well do. It is whether the university can afford to do the right thing and give the workers the same terms and conditions as other university staff.

Two questions

A disclaimer before we continue: it is impossible to definitively answer the question above with the information currently available. The university refuses to disclose the detail of its calculations around the cost of in-housing. And its annual financial statements in the main only give top-level numbers. But they do give a good picture of the overall financial health of the institution.

So, two questions: how is the university doing financially? And how do the university’s claims over the cost of bringing staff in house stack up?

For the first, let’s start by breaking down the costs of in-housing into two parts:

• one-off set-up costs involved in setting up new management and administrative structures for the newly in-housed staff, such as – supervision, payroll, recruitment, procurement and facilities.
• any extra regular costs of running the services in-house. For example, due to the workers getting a better deal, or due to the need for more supervisors, managers, HR staff, plus direct procurement of materials and so on.

These of course have to be set against the profit margins the companies are making on the contracts. More on that below.

There is plenty of cash in the bank

A look at the university’s latest financial statements suggests it could certainly afford the set-up costs. The accounts for the year ending 31 July 2018 showed the university had £45 million cash in the bank.

It’s true this is less than previous years and that the university’s debts are now bigger than the cash it has to hand.ⁱ But this is because management has been splurging cash on an ambitious expansion strategy.

In the last two years for example, £20 million was spent on “capital expenditure”, including refurbishments of Senate House and Charles Clore House, a new distance learning programme, IT systems and “improving and upgrading teaching and research infrastructure”.

Charles Clore House, www.london.ac.uk

University management say this investment will help to make more cash for the university, which will make it more financially sustainable. But clearly the money is there to cover the set up costs of employing staff in house. And if the management’s strategy does make the university more financially sustainable, they can more easily satisfy the cleaners, caterers and security guards’ demands for better treatment.

The accounts also show that, as well as cash in the bank, the university has £11 million in its “Unified Trust Fund”, plus over £90 million thanks to endowments. It also owns prime London property worth around half a billion pounds. Add up everything the university owns, then take off what the university owes to its “creditors” – most notably a £50 million loan from RBS – and the university’s net worth is £646 million.

The university’s deficits have been caused by management’s decisions

What about the budget deficit described by vice-chancellor Peter Kopelman above? The university may own central London property and have multi-million pound endowments, but it is unlikely to sell its main buildings and the endowments are almost all restricted to academic work. Meanwhile, it is losing money on its day to day operations – and so reluctant to add to its costs by bringing staff in house.

But the university has only started to make deficits after it embarked on the management’s much-vaunted five year expansion plan, starting in 2014:

Annual reports since 2015 explicitly state that weaker financial performance was due to the increased costs involved in the 2014-19 University Strategy. The 2016 report states, for example:

“The decision to make a deficit at the ‘operating level’ in 2015-16 is a direct consequence of the University Strategy”

One of the main goals of the five year plan was financial. It aimed for an operating surplus of as much as £9 million by 2019 but as we saw above, Peter Kopelman predicts another deficit for the coming year.

It’s notable that before this new direction, the university had been posting healthy surpluses – between £1 million and £8 million in the four years between 2014 and 2011, the last set of financial statements available on the university’s website. That averages out at just under £5 million a year.

So if the strategy does turn out to be successful, then the university will have the financial leeway to employ staff directly (as the surplus will be big enough to absorb the extra costs).

If it’s not successful then, from a financial point of view, the management’s much-vaunted investment plan has been a dud and has left the university in far worse financial health. In which case the university could have afforded to bring staff in house had it been managed better.

Peter Kopelman, www.london.ac.uk

Will bringing staff in house cost an extra £3 million a year?

In his public statement, vice chancellor Peter Kopelman said analysis commissioned by the university “had estimated the additional annual cost of bringing in house all currently contracted out services on a like for like basis to be around £3 million”.

This is in sharp contrast to the findings of similar reviews at other universities. A 2016 review by the Association for Public Service Excellence, commissioned by the School of Oriental and African Studies – itself a University of London member institution and located a stone’s throw away – found bringing cleaners in-house there should be “cost neutral” after initial set-up costs (the university agreed to bring its cleaners in-house last year).

Queen Mary – also a University of London member – brought cleaners in house ten years ago. A review soon after found that while “the real and estimated costs for the service had risen slightly above those involved in the past, these increases were marginal and the Chief Administrative Officer declared himself to be ‘perfectly happy’ with the cost rises so far.”

The review also found the cleaners themselves were “overwhelmingly positive about their new jobs”, due to “the increased pay and benefits, as well as working for the College with better management and opportunities for career development”.

In general, while in-housing sees staff get better conditions and increases university management and administration costs, it cuts out the profit margins being made by the outsourcing companies (there are also extra costs involved in contracting these companies and overseeing their work).

We do not know how much is being made on individual outsourcing contracts with the university as companies do not disclose that level of detail. But the accounts of the relevant subsidiaries registered at Companies House show they are making healthy profits from their services overall. The following table shows the revenues, ‘gross profit’ (which shows the profit they made directly from their various contracts), and the profit ‘margin’ for each company:*

* Security, AV, porters, postroom and reception staff employed by Cordant Security Ltd, cleaners employed by Cordant Cleaning, both part of the Cordant Group. Note also the results quoted above are just those from the subsidiaries employing the University of London workers. Aramark, Cordant and Bouygues are all huge corporations with far greater overall revenue and profits when all their operations around the world are included.

Admittedly there are a greater number of staff, and a greater number of job types, to be brought in house at the University of London. There were just around 100 cleaners at Queen Mary for example.

But could those differences explain the supposed cost of £3 million extra per year? The problem is, it is impossible to know how that sum has been calculated, because the university refuses to share the review. The university rejected our freedom of information request for a copy, saying disclosure would be “prejudicial to the conduct of public affairs”.

Who’s behind the figures?

The review was produced by an organisation called the Russell Partnership, which describes itself as the “UK’s leading Strategic Food and Technology Consultancy with over 600 global clients”. These include a range of universities and companies, plus events such as the Olympics and the Rugby World Cup.

Many of the Partnership’s staff come from the outsourcing industry. Founder and Chairman David Russell was “Group Managing Director of Europe’s largest private catering company”. Of the ten “consultants” listed on their website, two used to work for outsourced catering giant Sodexo, one for the rival Compass Group, one for Italian multinational catering company Autogrill Spa, with another for an unnamed “Outdoor Event Catering company”.

One former employee, Jan Matthews, worked for Aramark, the same US multinational that holds the catering contract at the University of London.

Of course, we do not how relevant these links are. Were the consultants with catering industry experience involved in the University of London review? If so, did that experience encourage them to look more favourably at the relative benefits of outsourcing?

The only way to know is for the University to publish the report.

We asked the University of London why it chose a consultancy with links to the outsourced catering industry to perform its review of outsourced services (including catering). It did not answer.

Chief Operating Officer Chris Cobb, www.london.ac.uk

Management are paid well enough to bring staff in house

As well as cost, outsourcing saves the management time and hassle. IWGB President Henry Chango Lopez, who used to be a porter at the University of London, said when the campaign launched: “Every time we go to the university to complain about poor pay or conditions, they hide behind the outsourcing companies and say it isn’t their responsibility.”

But the accounts show management are paid well enough to stomach any extra work involved. According to the latest financial statements, 11 members of staff enjoyed basic pay of over £100,000 in 2018. The seven lucky members of the “Vice Chancellor’s Executive Group” between them made £1.1 million.

Then-vice-chancellor Adrian Smith’s salary was £168,000 and he wasn’t even the best paid manager. The – unnamed – highest paid member of staff made between £220,000 and £225,000. This is presumably Chief Operating Officer – and prime outsourcing advocate – Chris Cobb.

That puts him on over 11 times as much as the university’s cleaners.

In response to the points above, a university spokesperson said:

“Since the 2014-19 strategy was written there have been a number of changes in the environment in which the University operates. There are a rising level of adverse factors that are likely to impact the University and its federal members. The University of London is not alone in facing these pressures – most higher education institutions are operating in a challenging financial environment.

“The University Strategy 2014-19 is one of investment vital for the long-term sustainability and success in the challenging years ahead.

“Your questions suggest an overly simplistic approach to a very complex set of issues. We have already started the process of bringing staff in house and are on track to bring front of house, portering and post room services back in-house by the end of May 2019.

“We will apply the same process in turn to the other externally contracted services and expect this to be completed by 2020.ⁱⁱⁱ

“The plans are responsible and appropriately phased to assure no disadvantage to staff, no deterioration in service standards and additional costs to be spread over more than one financial year.”

(We checked and the “process” to be completed by 2020 is the review of outsourcing services already announced.)

CORRECTION 6/9/19: The article originally stated the university spent £20 million to buy land in Stratford for new halls of residence. This has been removed. Vice chancellor Peter Kopelman has since said the University Partnerships Programme – the for-profit company the university is developing the halls with – provided the cash to buy the land.

The post Can the University of London afford to bring its workers in-house? appeared first on Corporate Watch.