Private firm running UK PPE stockpile was sold in middle of pandemic

The warehouse appears unremarkable, except for its size. Just off a motorway on an industrial estate in Merseyside sits a 35,000 sq m (377,000 sq ft) purpose-built warehouse with 20 loading docks to enable the storage and rapid distribution of hundreds of millions of face masks, aprons, gowns, gloves and body bags.

For security reasons, the Guardian has been asked not to disclose the precise location of the UK’s stockpile of personal protective equipment (PPE) for use in a pandemic. It is being stored on a site where builders moved the equivalent of more than 90 Olympic–size swimming pools of earth to make way for a vast, climate-controlled warehouse.

However, the Guardian can reveal that the management and the distribution of the stockpile has been outsourced to a private company, Movianto, which was sold two weeks ago for $133m (£107m) by its owner, a large US healthcare group.

The fact that Movianto was being sold in the midst of a global pandemic, months after being instructed by the UK government to start mobilising the PPE supply, would be remarkable enough. But the sale is only the latest development in a turbulent 18 months for Movianto, which has included legal disputes with a property developer who built the enormous warehouse in Merseyside.

The disputes culminated in Movianto securing a high court injunction in March last year, to thwart threats by the developer, Oliver Morley, to “lock the gates” and prevent Movianto employees from accessing the warehoused stock.

Morley’s company has since gone into administration and its legal claims against Movianto have been discontinued, but Morley maintains his legal battles with Movianto were not over. He called for an investigation into the firm, alleging there was “a much bigger story that needs to be told” about his former tenant, but declined to provide specific details.

For its part, Movianto firmly dismisses all of Morley’s allegations, pointing out that his property firm was defeated last year in court. The company insists the legal disputes and the sale have had no impact on its storage or distribution of PPE in recent months.

“Movianto firmly believes that it has and continues to perform to all contractual obligations,” the firm said.

But the saga is likely to put a spotlight on the UK government’s decision to outsource the management of the emergency stockpile. In three years, the stockpile appears to have been stored in three different warehouses. Meanwhile, management of the stock has been passed from a German–owned multinational to an American one.

In the coming months the custody of the UK’s emergency stockpile of PPE will be passed on to a family-run business based in suburban Paris.

A Department of Health and Social Care (DHSC) spokesperson said: “The pandemic influenza stockpile held under this contract has remained safely and securely stored at all times and has supported our Covid-19 response through the distribution of vital personal protective equipment and essential supplies to the NHS and social care sector.”

Widespread shortages of PPE have dominated complaints over the government’s handling of the pandemic in recent weeks, including from NHS workers who say their lives are being endangered by the lack of adequate protection. This week an RAF plane was dispatched to Turkey to secure more supplies.

The health secretary, Matt Hancock, insists the government is rising to the challenge, and has repeatedly said the PPE challenge has been “one of distribution rather than one of supply”. In addition to procuring new supplies from China, the DHSC has been drawing on the emergency stockpile, which it has stored since 2006 under its pandemic influenza preparedness programme.

That stockpile is made up of around 52,000 pallets of equipment worth an estimated £500m. While it contains antiviral medicines and flu vaccines which are of limited use against Covid-19, the bulk of stocks are said to be PPE and hygiene products. Much of the stock needs to be frequently monitored, updated and stored in temperature–controlled conditions.

The government owns the stock, but outsources its management to private firms. Previously, the contract was held by DHL. Movianto, a subsidiary of the US health company Owens & Minor, won the £55m deal in the summer of 2018.

As part of Movianto’s plans, the company entered into business with Morley to build the vast warehouse in Merseyside. In the meantime, the pandemic stockpile was to be temporarily housed in another warehouse, also owned by Morley, in Knowsley.

 It got to the point where I said I’m going to lock the gates and refuse you entry to the site.

Movianto’s plans were approved by the Cabinet Office, documents suggest. The company says its decision to enter into business with Morley was “made by executives no longer associated with Movianto”.

A notice for the new NHS contract stipulated that the contractor would be required to maintain “a ready state for deployment in the event of a pandemic event”.

In early 2019, Movianto became mired in disputes with Morley’s company, which accused the firm of not paying rent for the warehouse in Knowsley. According to Morley, his tenants became “uncooperative”. “This went on for weeks,” he said. Movianto strongly rejects the allegation, saying it paid rent “in accordance with the terms of the lease”.

Another grievance related to the payment of electricity bills to power the generators to ensure the stock, including medicines, was stored at the right temperature. Morley claims he ended up having to pay for electricity to power the generators, which “kept going on the blink” resulting, he alleges, in “temperature spikes”.

A Movianto source said Morley’s account was inaccurate. In a statement, Movianto said electricity generators were only needed because of “Morley’s own failure to provide a mains supply in accordance with his contractual obligations”.

By his own account, Morley’s financial disputes with Movianto culminated in him threatening the firm. “It got to the point where I said I’m just going to lock the gates and refuse you entry to the site.” When that happened, Movianto rushed to the high court in March 2019 and successfully obtained an injunction to ensure continued access to the warehouse.

Movianto said the injunction was required as “a result of Morley’s conduct and repeated threats to interfere with Movianto’s operations”. It said Morley’s allegations over rent and generators were undermined by “various court proceedings” that ruled in Movianto’s favour. In July 2019, under the control of administrators, Morley’s property company Industrial North West LLP discontinued its legal claims against Movianto.

Morley insists he will continue to seek legal action against Movianto – and he is used to high-profile disputes. In January, he lost a prominent lawsuit against RBS in which he claimed the bank’s controversial restructuring group placed him under duress by seizing his assets after struggling to repay a £75m loan. A high court judge noted Morley used the “borrowed personal wealth” to spend on “South African mining investments, property, cars, a yacht and a jet”.

Morley told the Guardian his lifestyle was the result of hard work and “had nothing to do with being a good landlord”. He insists previous business disputes are irrelevant to his grievances against Movianto, which came to a head in May 2019.

As works were completed at the Merseyside warehouse and Movianto prepared to transfer the stockpile from Knowsley, Industrial North West was forced into administration. Documents state the firm “failed to comply” with the conditions of a £61m loan facility.

Morley lost control of his warehouses and administrators stepped in. According to the administrator’s report, the legal dispute “caused delays to the construction works” at the new warehouse, which were finally completed in July 2019. Movianto said the legal disputes “have had no impact on Movianto’s work in response to Covid-19”.

According to a government source, the transfer of the UK’s emergency PPE supplies to the new warehouse was completed by the end of August 2019, four months before the first cases of Covid-19 emerged in China.

The warehouse is now owned by Warrington council, which bought the property for £45m in October. During a change of shifts on Tuesday afternoon, warehouse workers were seen having their car boots searched as they left.

In the coming months, their employer will switch from Owens & Minor to the French company EHDH Holding Group, under a deal agreed on 6 April. The sale is expected to be completed before the end of June, with demand for supplies in the UK’s pandemic stockpile expected to continue for many months.

The distribution of that stockpile’s PPE, it seems, may no longer solely be the responsibility of Movianto. Eleven days ago, the DHSC announced a new “24/7 military operation” to oversee the supply of PPE to health and care workers. “We’ve had to create a whole new logistics network, essentially from scratch,” Hancock said.

A government source said the coronavirus outbreak presented different requirements to a flu pandemic – the basis of Movianto’s original contract. Movianto was now “supporting” the government’s PPE plan through its contractual obligations, the source said. Movianto said the terms of its NHS contracts were “confidential”.

Jeff Jochims, the chief operating officer of Owens & Minor, said: “We look forward to closing the sale of Movianto business to EHDH, but in the meantime will continue our ceaseless work to support the global response to this pandemic.”