Assurances demanded for Telefonica contract staff at crisis-hit Capita

Telecoms & Financial Services, Capita

Turbulence at Capita – which has spooked the markets and triggered fears that the outsourcing giant could be in danger of becoming the ‘next Carillion’ – has prompted CWU demands for Telefonica to make contingency plans to safeguard nearly 2,000 staff, including many of its ex-employees, who conduct vital customer-facing work for the O2 and Tesco Mobile brands.

Following the near halving of Capita’s share price last week in the wake of the company’s fourth profit warning in just over a year, the union has written to Telefonica chief executive Mark Evans pointing out the vulnerability of Telefonica, as well as its previously outsourced employees, should Capita collapse.

In a letter to Mr Evans, who took over from Ronan Dunne in August 2016, CWU assistant secretary Sally Bridge has pointed out that the current dramas at Capita have vindicated the union’s warnings in 2013 that the then biggest outsourcing of customer facing staff in UK industrial history carried significant risks of the mobile giant ‘losing control’ of work streams on which its very success depends.

“It’s unclear as to whether Capita will survive the current turbulence,” Sally continued in Friday’s letter – stressing that Capita’s new chief executive, Jonathan Lewis is himself on record as saying Capita is ‘too big, too complex and lacks operational discipline and financial flexibility’.

“The CWU therefore questions why Telefonica would want to continue to risk using Capita to handle a major piece of its customer facing work,“ Sally added.

“The CWU is seeking an assurance from Telefonica that, in the event of Capita going into liquidation, that you will take back in-house the work and employees and safeguard the jobs and pensions of those Capita employees currently undertaking Telefonica work.”

While Capita’s share price has rallied marginally since it ‘kitchen-sinked’, in City parlance, last Wednesday, as of this morning the company’s total value, based on a gyrating share price of between £1.62 and £1.75 is just a sixth of that registered as recently as September 2016, and an eighth of its all time peak in July 2015.

Stressing that Capita is still, therefore, in hazardous territory, Sally concludes: “Just because the CWU has always sought to engage constructively with Capita since the TUPE transfer of around 2,500 CWU-represented grades out of Telefonica in 2013, that doesn’t mean to say that we feel any less strongly than we did back then that this outsourcing was ill-conceived, dangerous and should never have taken place.

“We made it clear at the time that, once Telefonica outsourced that amount of customer facing work, it risked losing control of the customer interface which is any company’s lifeblood. If what’s happening now isn’t a wake-up call for senior management in Telefonica I don’t know what is.

“It’s true that, on one hand, some are saying this isn’t a ‘Carillion moment’ and that, even if it became one, the Government would have to step in as it couldn’t be seen to have stood back and allowed two Carillion-style failures.

“That misses the point, however, that four Capita profit warnings in just over a year should have set alarm bells ringing for Telefonica, never mind the Government.

“Companies that outsource do it to save or make money and they simply cannot wash their hands of responsibility when things go awry because customers and their brand is at stake – let alone the livelihoods of the former employees they handed over to a third party concern.

“Contingencies plans simply have to be made – and the CWU understands the original 10-year outsourcing agreement between Telefonica and Capita factored in a review and possible break clause after five years of the contract had run – an anniversary we’re conveniently just approaching.

“The CWU believes it’s therefore high time that Telefonica UK’s Board seizes this opportunity and urgently reconsiders the whole issue of whether the outsourcing of brand-critical customer facing work is actually in Telefonica’s best interests – and, more pertinently, whether it should be brought back in-house.”