The figures about criminal gangs just don’t add up

I’m Peter Webster, chief executive of Corps Security, and this is where I examine the issues affecting the security industry. My thoughts and opinions are intended to generate debate and whether you agree or disagree with them, you’re welcome to post your comments below.

Around a year ago I wrote a blog outlining my concerns about the phased transition to a business-licensing regime that will run alongside a new individual licensing process. My view then was as it is now and I still believe that this will simply mean swapping a scheme that adds value for one that has none whatsoever, and the industry will suffer as a result.

On 30th June 2014, Lord Taylor, set out the Home Office position and said that the government expects the introduction of the statutory licensing of private security businesses to come into force in 2015. The Security Industry Authority (SIA) will continue to regulate the industry and will oversee this transition.

With a number of industry professionals sceptical about the benefits- and many more just not sufficiently engaged in the process, -in order to try and add weight to their argument, the pro-business licensing brigade, including the SIA, has recently claimed that its proposals will help eradicate the number of criminal gangs running security contracts. Having heard this from a number of different sources, it’s a development that I find particularly concerning as it is based on some very dubious statistics and flawed logic.

Putting the numbers in perspective

I was recently informed that a Liverpool-based criminal gang which was running a security contract had been successfully put out of business; meaning that legitimate security companies are now fulfilling contracts worth around £3m. While I welcome the prosecution of any organisation that brings the industry into disrepute, a sense of perspective is required here. According to my estimates, based on available figures, £3m represents just 0.01 per cent of the total security sector.

For argument’s sake, let’s be generous and suggest that the total value of the contracts being carried out by criminal organisations is 10 times bigger than £3m. This would still only work out at 0.1 per cent of the UK’s security contracts and, therefore, it’s a problem that doesn’t really exist. It is my view that this figure is not large enough to warrant or justify the wholesale change of a system that, although not without its faults, continues to serve the industry well.

Added cost and complexity

It is claimed that business licensing and regulation will support those organisations that have been through relevant checks and due diligence, and can demonstrate that they are ‘fit and proper’ to supply security industry services. To qualify for an SIA business licence, a security business must comply with issues surrounding identity, criminality, financial probity, integrity, and conformance with relevant British Standards. This will require a business to ensure a licence application process is carried out for its employees that confirms an employee’s identity, address history, qualifications, and right to work in the UK.

A business licence will last for five years and companies will be required to comply with the conditions of the licence, provide a yearly return evidencing its continued compliance, and pay an annual subscription fee. It is claimed by the SIA that this will give businesses more responsibility for the individuals that they employ, and achieve a reduction in the regulatory cost and burden on the private security industry as a whole. Unfortunately, I believe that these claims are unfounded and, having crunched the numbers, we estimate that business licensing will cost Corps Security around £50,000 a year and, as yet, we have had no indication of the corresponding reduction in the individual licensing costs. Corps Security currently pays around £150,000 a year in licensing fees, so the individual license reduction must be at least 33% in order for us to be cost neutral. For those companies unlike us that don’t currently pay their employees’ SIA licence fees, the costs will come as a huge shock.

The additional bureaucracy, time, inconvenience and uncertainty it will cause will be a cost that we may have to pass on to our customers. Not surprisingly, they will be highly resistant to increased charges for security services, so it could mean that those who demonstrate continual improvement via the Approved Contractor Scheme (ACS) could decide to withdraw from it to save money.

The limitations of background checks

Going back to the subject of criminal organisations operating in our industry, the idea that business-based regulation will better control the type of companies that can operate in the sector is a smoke screen. As things stand, companies are not allowed to employ unlicensed individuals anyway, so by definition they have to be ‘above board’. The idea is to regulate the ‘controlling minds’ involved in security businesses but I am sure that organised criminals will be capable of avoiding direct association. Indeed, I am simply not convinced that the business checks will be rigorous enough to prevent criminal bodies from falsifying their persona and so cover up any unscrupulous activities. And what about foreign-owned organisations – how will they be checked?

Equally, the current situation allows individuals the freedom to change companies, while providing their new employers with the peace of mind that a new recruit has passed a rigorous set of checks. But who will be responsible if TUPE-transferred staff are found to have been vetted improperly?

Perhaps most importantly, the SIA has been good at making sure that only those who should work in the security sector are permitted to do so. The industry has over 300,000 licensed personnel, but tens of thousands of individuals have been refused licences. For a variety of reasons – from criminal records to unverifiable employment histories – these people have been deemed unfit to be in a public-facing role.

Taking the wrong course – in poor visibility

To address the situation, there is now a ‘Strategic Consultation Group’. This only has 31 members – less than 20% of whom actually run a security company today and 26% are SIA officials – and yet the future of regulation is being discussed through this group, which I find rather concerning.

Have the employers’ groups that are represented within the Group adequately consulted with their members about the impact of these measures?

The truth is they cannot adequately consult with their members because, as far as I can see, there is still a massive lack of clarity about the proposals regarding the true and accurate financial impact and the additional administration burden placed upon companies in the industry.

The new SIA chairman, Elizabeth France, has vowed to be ‘audacious’ and is determined to push regulation as far as possible; which means the SIA will do everything it can within the statute to move in the direction of travel that it thinks the industry and ministers want it to go in, and where it believes is best.

But how does the new SIA chairman know which direction the industry wants to go in? From the ‘Strategic Consultation Group’ alone? We have already established that it is not representative of the real industry. At a recent industry event Elizabeth France said that “a tick box approach to regulation doesn’t help anything,” adding that the SIA “…should be working with you to ensure that between us we take responsibility for raising standards but maybe the balance between us, as the industry becomes more mature and we understand our role as a regulator better, is that more of it is done by the industry… with the regulator helping and supporting.” This provides a clear indication of the intention to increase the administrative and compliance burden on the industry.

Time for action

In my opinion much of the support for the new regime is based on the fear that if we do not agree with what’s being offered, then the government will simply revert back to its previous position of deregulation. What we need as an industry are hard facts that can be discussed, but until we get them our industry representatives should not be giving any support to these ‘half-baked’ and poorly communicated proposals.

I believe we have to act in the best interests of all, and make our voices heard about the needless introduction of two layers of licensing.

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