PROFITING FROM POVERTY

RMT helpline 0800 376 3706 :: january 2023 :: RMTnews 14 RMT has exposed the weaknesses and costs of the outsourcing model as it fragments services in the rail industry. For example, train operating companies have little knowledge of what cleaning was taking place and how many cleaners were working to provide this essential service. Rail cleaners reported that they did not have enough staff working on their contracts. This is a consequence of the actions of outsourcing companies, who seek profits by driving down labour costs by holding down pay, which creates regular turnover of staff, and by cutting jobs. However, as RMT’s new report ‘Corporations Cleaning Up’ shows the pandemic has been pretty good for the ‘facilities management’ (FM) business. For these companies Covid has meant new and renewed contracts to provide enhanced services, at least in theory. This may be good news for shareholders and executives but has meant little or nothing to the cleaners on the ground. RMT analysed the accounts of seven facilities management companies with contracts on the railways to see how they have fared during the pandemic and subsequent cost-of-living crisis. Some companies made net profits after tax of £32 million in 2020 but that these profits trebled to £101 million in 2021. All but one company recorded bigger profits in 2021 than in 2020 (Table 1). Perhaps more interesting was the fact that they also all made bigger profits in 2021 than in 2019, the year prior to the pandemic. In aggregate their profits for the year more than doubled on those from 2019. These increased profits led to higher overall dividend payments. Five of the seven companies paid dividends during the two pandemic years. Dividend payments overall for the seven companies were many times higher in 2021 than in the pandemic year but they were also three times the size of payments in 2019 (Table 2). • Atalian Servest paid dividends in both years totalling more than £22 million. It has also paid interim dividends worth £8 million in 2022. • Mitie plc paid a dividend of £25.2 million in 2021-22 after missing a year in 2020. • Bidvest Noonan paid a dividend of £14.6 million the same year. The cleaning rich list It’s been a good time for the cleaning rich list too. The CEOs of Mitie and ISS at group level both saw double digit, inflation busting pay rises. ISS’s Jacob Aarup Andersen got £1.8 million in 2021, but the standout winner was Mitie’s Phil Bentley whose remuneration package was worth £3.8 million last year. One step down at the level of the main facilities management subsidiaries, managing directors at Atalian, ABM, Bidvest Noonan and Carlisle all saw double-digit inflation-busting pay rises with Atalian Servest’s managing director getting a 32% pay rise that took him up to £1.7 million. MERGERS, ACQUISITIONS AND SHARE BUYBACKS This increased profitability and the opportunities to be made from the need for cleaning during the pandemic may well explain why there has been a spate of buyouts, takeovers and measures designed to manipulate share prices among the facility management companies. • In March 2020, Churchill secured private equity fund investment from a fund named ESO Investco VII Sarl, managd by Soho Square Capital Partners and from Intertrust UK Ltd, a subsidiary of Intertrust UK. • In February 2021, South African outsourcing conglomerate Bidvest used its Irish subsidiary Bidvest Noonan to acquire Axis Contract Services. • In July this year, Atalian Servest’s parent company the French outsourcing giant Atalian Group announced that it had received an offer of acquisition from private equity fund Clayton Dubilier and Raice (CD&R) and merged with OCS Group International. • In June 2022, Mitie announced a £50 million buyback of its own shares. Share buybacks are a technique of financial engineering that boosts share prices by reducing the stock of available shares and its asset base. A rising share price is good news for a company looking for finance or, for executives like Mitie’s Phil Bentley, whose pay is tied to share price performance. Cleaners on rail are typically paid at around the same rates as cleaners elsewhere in the economy. That means they are paid at or around the National Minimum Wage of £9.90 an hour or at best the Real Living Wage, currently set at £9.90 an hour and due to rise by next May to £10.90. Cleaners get no company sick pay, most of them get no travel facilities and no decent pension provision. Their experience of the pandemic and the subsequent cost of living crisis has been very different. As we will show in a subsequent report, their pay has been held down, losing value radically and throwing them even further into economic distress. PROFITING FROM POVERTY RMT report exposes how outsourcing companies exploit cleaners