The Ministry of Justice revealed yesterday that G4S will hand over the category C jail in Hull in July 2013 after 21 years in charge, after failing to convince the government it could offer a better service than the state.
Justice minister Chris Grayling said three other prisons will remain under state control for the foreseeable future, despite his department spending over a year fielding private sector bids to take them over.
The MoJ has even rejected a bid from HM Prison Service, in partnership with FTSE 250-listed Mitie, to operate all six of the jail groups that were put out to tender. Mitie declined to comment.
The ministry said that Wolds, Durham, Coldingley and Onley prisons will be more cost-effective if they remain run by the state sector.
Andrew Haldenby, director of the Reform think-tank, said this U-turn “calls into question the government’s whole approach to improving public services”.
The CBI said the decision was “really disappointing”, adding: “Opening these services up to the scrutiny of competition delivers better quality and value for the taxpayer.”
G4S said in a statement it would meet with officials in the coming days to hear how its bids fell short.
Prisons minister Jeremy Wright told the BBC yesterday that G4S’s loss “is no reflection on what they are doing in prisons that they already operate and it doesn’t mean that they won’t have a part to play in some contracted-out services, which we think there is scope for across the prison estate”.
The ministry hopes to call for bids to run some ancillary services such as catering in the spring.
Contracts to oversee two prison groups are still up for grabs, with Serco, Sodexo and MTC with Amey all shortlisted.
G4S, which came under fire over its botched Olympics security work, saw its shares close 3.1 per cent lower.
Analysts said the loss for G4S, while disappointing, is unlikely to have a large impact on results at the firm, which runs five other UK jails but makes most of its revenue overseas.