Australian sales furore turns spotlight on UK asylum hotels

3 months ago 19

The British government is investigating its contracts with an Australian travel company that helps manage thousands of asylum seekers after the business stunned investors by revealing it wrongly claimed sales worth $156 million.

British officials have warned of an “appalling” overspend on the sensitive deals with Corporate Travel Management, which has removed its UK chief and admitted to flaws in its accounts.

The company, led by high-flying founder Jamie Pherous, once said its asylum seeker contracts would be worth $3 billion over several years but is now preparing to restate its financial results and has placed its shares in a trading halt.

The Bibby Stockholm, an accommodation barge, was used to house asylum seekers under Corporate Travel’s UK contract.

The alert about its revenue claims has raised concerns it was charging too much to house the asylum seekers in hotels across the UK under contracts arranged by the former Conservative government to deal with people arriving by boat or truck across the English Channel.

In one example of its UK work, the company managed housing for 500 asylum seekers on a barge called the Bibby Stockholm, which was moored at a harbour in southern England.

The use of the barge ignited criticism of the asylum seeker policy and led to protests at the Dorset harbour.

While the Labour government stopped using the barge when it came to office last year, it has signed other contracts with Corporate Travel Management to help manage thousands of people who seek to stay as refugees.

A contract notice issued in June said the UK government expected to pay £161 million ($326 million) to the company over four years to 2029 to arrange housing, meals and laundry services at hotels used to house asylum seekers.

Jamie Pherous, founder of Corporate Travel Management, in 2020.

Corporate Travel Management chairman Ewen Crouch apologised on Friday for the impact of the trading halt on shareholders.

“We also extend our sincere apologies to the affected clients in the UK,” he said.

“While further investigation is required, including a comprehensive review of our UK operations and our overall governance framework, we remain fully committed to taking the necessary action to restore confidence.

An anti-immigration protest in August outside the New Bridge Hotel in Newcastle upon Tyne, which was used to house asylum seekers.

“A process is now under way to consider all necessary remediation for the clients impacted in the UK.”

Crouch did not name the customers, but the Home Office has become a key client in the UK because of the surge in refugee claims in recent years.

Official figures showed a 27 per cent increase in the number of “irregular arrivals” to 49,000 in the year to June. The government said 43,000 of these came by boat.

The frustration of the Home Office became clear on the weekend in a statement to The Financial Times that confirmed an “urgent investigation” into the contracts because of the concerns about an “appalling” overspend.

“All taxpayer money owed will be recovered,” the Home Office told The Financial Times.

A representative of Corporate Travel Management in the UK declined to comment.

Corporate Travel Management told the Australian Securities Exchange on Friday it expected to reverse revenue worth £58.2 million by restating its results for 2023 and 2024, while also reversing another £19.4 million in the 2025 financial year. The combined total is £77.6 million.

The company said this would involve “refunds due to customers” as well as the “contractual uncertainty” when revenue could not be recognised in the accounts.

UK Home Secretary Shabana Mahmood has vowed to stop using asylum hotels by the end of this parliament, after years of disputes and protests at the way hotels and motels were turned into emergency housing.

“I will close every single asylum hotel,” she said last week. There were about 32,000 asylum seekers in hotel accommodation in June, down from a peak of 56,000 two years ago. The government plans to move many of them to military bases.

Corporate Travel Management said last year it was responsible for work such as finding and allocating hotel and vessel accommodation, transport and meals. It subcontracted some services, such as food supply.

It estimated the contract value with the Home Office at $3 billion in “total transaction value” over two years but noted that this was based on the gross sales and that its revenue would be a small proportion of the overall contract value.

“Currently, the accommodation spend under the contract is significantly lower than $1.5 billion per annum,” it said last year.

The company’s website says it does not participate in mandatory detention and the asylum seekers have freedom of movement.

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