De La Rue ditches passport appeal in ‘dark day’ for UK manufacturing
De La Rue saw shares fall as it also warned over profits after taking a £4m hit from bid costs for the contract.
British passport maker De La Rue has ditched its appeal against the Government’s controversial decision to choose a Franco-Dutch company to make the new post-Brexit passports, and revealed a £4 million hit from its failed bid.
Basingstoke-based De La Rue said it had “considered all the options”, but would not challenge the move, which will see the £490 million contract handed to Paris-headquartered Gemalto.
Shares in De La Rue dropped 4% as it also warned over profits for the second time in a month, blaming the £4 million in bid costs for the contract.
This news will come as a bitter blow to De La Rue workers who now face an uncertain future Louisa Bull, Unite national officer
De La Rue said underlying operating profits were now forecast in the “low to mid £60s million range”, against previous expectations for between £71 million and £73 million.
Trade union Unite said it was a “dark day for UK manufacturing”, with the loss of the contract coming as a blow to De La Rue’s passport printing factory in Gateshead.
The division, including passport printing at De La Rue, directly employs 313 staff, according to the group’s recent annual report.
De La Rue said it made the decision not to appeal following legal advice, concluding it was “not in the best interests of the company”.
A De La Rue spokesman said: “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.”
He added: “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.”
The firm insisted it 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”.
But Unite raised concerns over the impact of the decision on De La Rue’s staff.
National officer Louisa Bull said: “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 are 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.”
The Government has come under heavy fire for its decision to choose a European firm for the contract, but has claimed it will save £120 million during the lifetime of the 11-and-a-half-year contract.
De La Rue had initially vowed to appeal against the decision, with executives at the firm claiming Gemalto won the contract simply because it undercut its rivals.
The Home Office decision to choose Gemalto – which is listed on the French and Dutch stock exchanges – has drawn anger from a raft of politicians, including shadow home secretary Diane Abbott and Conservative Brexiteer Jacob Rees-Mogg, whose North East Somerset constituency is home to De La Rue’s Bathford plant.
Labour’s Liz Twist asked an urgent question on the issue in the Commons late last month, when Home Office minister Caroline Nokes told MPs the Gemalto bid “was the contract that provided the best value on all counts”.
De La Rue’s decision comes just a month after it warned over profits and announced the departure of its finance chief, sparking a shares plunge.
In its latest earnings alert, De La Rue said as well as the passport bid hit, results are also set to be impacted by delays in the shipment of “certain contracts” in the last week of March.
“At this early stage of the new financial year, the group is cautious about the out-turn for the full year, however it starts off with a satisfactory order book,” it added.
Gemalto already produces the UK’s photo driving licence.
The firm – which is being acquired by French defence group Thales – has a number of sites in the UK, including factories in Heywood and Fareham.