Support service giant retracts letters sent out to suppliers demanding cash back and apologises ’unreservedly’

Support services giant Serco has cancelled plans to make suppliers pay back cash to help it meet savings agreed with government and has apologised “unreservedly”.

In a statement issued today the company said: “Our plans evolved and we decided not to seek or accept any contributions from our suppliers, who had recently received letters asking for rebates.

“As a company that values our relationships with all our supply chain partners, large and small, we deeply regret this action and apologise unreservedly to them for the concern that this has caused. We are now communicating this to our supply chain partners and retracting the letters.”

Yesterday the Sunday Telegraph reported that Serco had asked suppliers for 2.5% of its 2010 spend with them back, directly in contravention of government’s procedure.

Paymaster general Francis Maude, who has been meeting government suppliers to demand multi-million cuts in contract costs for government, has expressly said that firms aren’t to meet those demands through bashing their suppliers.

Reacting to the reports on Sunday a Cabinet Office spokesman said: “We unequivocally disagree with and are highly critical of the approach taken by Serco. Francis Maude will be calling them in to explain themselves.”

The Sunday Telegraph quotes a letter from Serco’s finance director Andrew Jenner saying: “[chief executive] Chris Hyman and I have given our personal commitment to the Cabinet Office that Serco and its supply chain will provide our total support” to the government plan to save millions from central procurement.

Jenner adds: “I am asking you to offer us a rebate of 2.5pc (exclusive of VAT) on Serco’s full year spend with you for the 2010 calendar year in the form of a credit note.

The news comes as the government announces the appointment of former trade secretary Lord Young to chair a review in to how to improve conditions for small businesses.