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Capita – Symbol Of What Is Wrong With Capitalism?

March 2nd, 2017

Capita, somewhat unlovingly called C*apita by mostly ex-employees of whom I am one (ex-employee that is), reports a 33 per cent drop in pre-tax profits as it loses its chief executive Andy Parker. After 3 years in charge, Mr Parker joins the additional 2,000 job losses announced in December after the second profits warning. To further cut Capita’s 69,000 staff headcount by about 3 per cent, plans are afoot to send some jobs to India - not the 1st time – and “introduce robotics and automation to parts of the business” amid another restructure.

Capita OfficesJob losses and expensive restructuring – this one reputed to be in the region of £59.9m – are not new to Capita. For years, now Capita like its competitors Mitre, Serco and G4S, the latter two from which Capita took over the electronic tagging of prisoners, have maintained a semblance of growth and profitability by buying up every smaller, innovative, hungrier rival that successfully challenges any part of their business. It then, despite pre-purchase promises, proceeds to incorporate the new acquisitions into the behemoth creature it has become.

What ensures are job losses and business restructuring on a nearly constant basis. Very rapidly, the reason why the acquisition was successful blends into the faceless, bland corporate identity. Three or four years later, relieved from their exit contract clauses some of the ex-employees embark on new ventures challenging Capita in that or related markets. I reckon if your businesses could get bought two or three times, retirement in the Caribbean beckons. For a change though, Capita is looking to sell of some divisions “as it seeks to reduce debt and simplify operations” in other words improve profitability. Who is going to buy parts of Capita? Very possibly another Capita-like venture.

These corporations do not add value. They grow big enough to win nice big Government contracts by buying up smaller companies and amalgamating them, firing staff, restructuring and generally picking up some new customers in the process. They are not past acquiring a company just to get them out of the market – ditching the products and services that they have paid for. Other behemoth corporations – all members of the large club – continuously give these corporations business to the detriment of the medium and smaller companies and so the 'continued' growth ensures for years.

These companies are the result of present day Capitalism's demands for increased growth. The concept of a 'mature market' i.e. one in which growth is limited, seems to have escaped from investors' vocabulary. To achieve this continuous growth, costs are cut – read job losses – and more profitable enterprises acquired. The very same enterprises that grew profitable in markets where market share was lost to the very same process of job cuts and purchases. It's a life cycle of sorts.

It is worth noting that even in these difficult times – amid job losses and expensive restructuring - a total dividend of 31.7p, unchanged on 2015, is the recommended and hoped to be maintained in 2017, very little comfort to those losing jobs when the company is still making profits.

Hmmm, maybe I should start a nice little Capita ankle biter. I could be retired in 5 years!