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Exclusive: G4S Talks Stall Over Olympics Deal

(c) Sky News 2012

The Home Secretary could be asked to intervene in the row over G4S (Other OTC: GFSZF.PK - news) 's failure to provide thousands of security staff at last summer's London Olympics amid faltering negotiations over a financial settlement.

I have learned that discussions between G4S and Locog, the organising committee for the Games, have made little progress during the 10 weeks since the Paralympic Games ended.

The two sides are approximately £100m apart in terms of their expectations about the eventual cost to G4S, the FTSE-100 support services group, according to sources close to the situation.

The ongoing dispute threatens to cast a shadow over G4S's efforts to win other public sector contracts and could re-emerge as a threat to the role of Nick Buckles, G4S chief executive.

G4S has currently estimated that the Olympics fiasco will cost it little more than £50m – a hit that the company has already taken in its accounts – but Locog executives are at the moment holding out for closer to £150m.

Since the Olympics, G4S has reported healthy financial results but has lost out on a number of prison management contracts.

Details of the dispute resolution agreement between the private security contractor and Locog, whose chief executive, Paul Deighton, will step down next month to become a Government minister, have remained secret until now.

As I understand it, there are a number of stages which must fail to produce an agreement before Theresa May, the Home Secretary, would be required to intervene.

The current talks between the commercial directors of the two organisations have reached an impasse, insiders said today. The next stage would be for Mr Buckles and Mr Deighton to hold face-to-face talks, which sources say are likely to take place before Christmas.

Under the terms of the contract between G4S and Locog, an independent panel of experts would then be appointed if the chief executives cannot reach a deal between themselves. If that panel does not then produce a ruling that is satisfactory to both sides, Mrs May would then be asked to oversee the provision of a binding ruling by another independent expert.

People close to G4S said it still hoped to conclude discussions by the end of the year and that it remained committed to its “best estimate” that the contract failings would result in a loss of around £50m.

They insisted that the prospect of the row continuing to the point that Mrs May would be asked to intervene was remote.

G4S endured a torrid summer after revealing just weeks before the start of the Olympics that it would not be able to provide more than 10,000 personnel to provide security services at Games venues across the country.

The contract failings led to Mr Buckles being castigated by MPs (BSE: MPSLTD.BO - news) on the Home Affairs select committee, although he kept his job following a review by the company’s board.

Three other directors were not so fortunate, with two of G4S's most senior executives leaving in September followed by a further departure this month.

People close to G4S say the company’s chairman, John Connolly, will announce the recruitment of three new non-executive directors before the end of the year.

A Locog spokeswoman said: “We are working hard to reach a financial settlement with G4S.”

G4S declined to comment.