De La Rue cans plans to challenge passport deal

Jo Francis
Wednesday, April 18, 2018

The saga over the future production of UK passports has taken another dramatic twist - De Le Rue has abandoned plans to pursue a legal challenge against the Home Office’s controversial decision to favour a low-cost continental supplier.

In a Stock Exchange announcement this morning (18 April), De La Rue said: “Further to the announcement on 22 March 2018 and having considered all options, the group today announces it will not appeal against HMPO’s decision on the UK passport tender. De La Rue will continue to fulfil its existing contract and assist with transition to the new supplier and is therefore expecting no impact on the group’s performance in the next 18 months.”

A De La Rue spokesperson said the decision had been made in the light of legal advice combined with the group's ongoing commercial interests: "We remain both surprised and disappointed by the decision of HMPO to award the contract to a competitor. We believe De La Rue submitted the highest quality and technically most secure bid. As we initially announced, we have looked at all possible avenues open to us, and thoroughly evaluated all our options. Following four weeks of intense consideration and clear legal advice, we have taken the decision not to challenge the award of the UK passport contract," the spokesperson said.

"Having considered all the legal and commercial implications of pursuing legal action, we have concluded that it is not in the best interests of the company to proceed with an appeal. We will continue to deliver a high level of service to HMPO until the contract concludes. In parallel, we will focus on driving growth internationally  for ID, Currency and Authentication."

The new passports will be blue

De La Rue also said that bidding to retain the huge £490m contract had involved £4m in costs, which would now be written off.

The group’s share price immediately fell by nearly 8% to 453.5p after the markets opened, but subsequently recovered some ground.

The decision by HM Passport Office, part of the Home Office, to award the contract to Franco-Dutch firm Gemalto has caused a huge controversy and has hoisted a question mark over the future for the 200 workers at De La Rue’s Gateshead plant that currently work on production of UK passports. The site employs around 600 staff in total.

The extended deadline for De La Rue to mount its legal challenge expired yesterday.

De La Rue chief executive Martin Sutherland had publicly questioned the viability of Gemalto’s pricing after being outbid for the ten-year contract, describing the rival’s pricing as “incredulously low”.

The Home Office claimed that Gemalto’s offering would involve savings to the taxpayer of between £100m-£120m over the course of the contract.

The decision has caused a storm of adverse reaction, with hundreds of thousands of people signing the various petitions launched to oppose the move, and urgent questions tabled in Parliament, all to no avail. By contrast, many people viewed it as simply a reflection of free trade, and said detractors were being protectionist.

Union Unite had opposed the move and said it would fight to save the jobs of its members that are under threat in Gateshead. In response to the latest turn of events, national officer Louisa Bull issued the following statement, and said Unite members were still mobilised to fight the decision: “This news will come as a bitter blow to De La Rue workers who now face an uncertain future. Workers will feel let down that the company is not prepared to fight the government’s decision to ship the production of the new blue passport overseas. 

“For the last decade De La Rue has produced the UK’s passports securely without any problems and provided a source of decent well paid jobs in the North East.

“Theresa May and her government is now putting all that at risk with little thought of the consequences or the shockwaves that it will send through the community and local economy.

“It would not happen in France where they produce their own passports on grounds of national security and it should not happen here in UK.

“Unite will be working closely with De La Rue to seek assurances on jobs as well as supporting workers through these uncertain times.

“It need not be like this though. Unite and our members are mobilised and prepared to fight the government’s decision which represents a dark day for UK manufacturing.

“Theresa May needs to wake up to the anger her government’s short sighted job destroying decision has generated and intervene to back UK passport workers by ensuring Britain’s blue passports are made in the UK.” 

In De La Rue’s trading update for the year to 31 March it also issued a profits warning and said that underlying operating profits were now expected to be in the range of £60m-£65m, in part impacted by the write-off costs associated with the failed passport bid, as well as some shipment delays in an unspecified contract at the very end of the financial year. Sales are expected to increase by around 6%.

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