Serco at sea after losing Docklands

OUTSOURCING giant Serco was dealt a body blow last night after it lost its flagship contract to operate the Docklands Light Railway, writes PeterCampbell.

It has run the overground network in London since 1997, and had been bidding to keep it until 2021.

The £700m work went to a joint venture between French group Keolis and Spanish firm Ferrovial, which owns Heathrow airport.

Under the leadership of Rupert Soames, Serco has been trying to expand its rail work. It recently won the contract for the Caledonian Sleeper service from the Highlands to London, and plans to bid for the Great Western franchise.

It had pointed to the DLR contract as an example of its railway expertise. The line shuttles 100m passengers a year between the City, Canary Wharf and East London.

Losing the contract comes only 24 hours after Soames warned that Serco (down 1p at 362p) faced a series of expensive write-downs on its loss-making contracts.

Analysts said losing the work was a ‘body blow’ to the firm.

Hector Forsythe at Oriel said: ‘This loss today shows that Serco has fights on its hands to hold on to business as well as restore new [contract] win momentum.’ A STRONG pound is bad for British manufacturers and damages exports – or so the story goes.

But this graph, from Berenberg Bank, shows manufacturers have brushed off the rise in sterling over the past 18 months.

The manufacturing PMI, an index of activity in the sector, points to sustained growth with factory output rising at the fastest rate for 20 years.

Berenberg’s Holger Schmieding says: ‘Stronger sterling reflects a stronger economy rather than being a challenge to it.’