The rise of the UK's private security companies

By Edwin Lane
Business reporter, BBC News

Image caption, Graham Binns says the future is bright for the UK's private security industry

Major General Graham Binns is not your typical chief executive.

As a lifelong soldier, he is more used to commanding an armoured division than a company boardroom.

In 2003 he commanded British troops invading southern Iraq, and in 2007 returned as the commander of British forces overseeing the handover of Basra to the Iraqis.

But now, four months into his new job as chief executive of Aegis Defence Services - a British private security company (PSC) - he has left army life behind.

"It's liberating," he says, sitting in Aegis's comfortable headquarters in a plush office building in central London.

"Thirty-five years in government service was a wonderful experience. But in the world of business, ex-military people have got a lot to offer - I certainly hope so anyway."

For Aegis, netting a leading figure from the Iraq war can only be good for business - particularly when your business is in the often-controversial world of armed private security.

Now one of the UK's biggest PSCs, Aegis has made millions from the conflicts in Iraq and Afghanistan since it was founded just eight years ago.

Iraq bubble

It is even fair to say that Aegis, like much of the private security industry, owes its very existence to the last Iraq war.

When the occupying forces found themselves trying to reconstruct the country while overwhelmed by Iraqi insurgency and sectarian violence, PSCs saw a lucrative opportunity.

"In Iraq in 2003 and 2004 money was basically free," explains Andy Bearpark, director-general of the British Association of Private Security Companies (BAPSC).

"That meant [private security] contracts were being let for ridiculous amounts of money - millions and millions of dollars of contracts being pumped into the industry.

"The industry exploded in terms of the volume of business on the back of Iraq."

Dozens of firms from the US and the UK stepped in to offer their services, providing governments and reconstruction NGOs with armed security personnel, convoy escorts, logistics support, training for the Iraqi security services, and risk analysis.

Names like Armorgroup and Control Risks, which had been around in the UK since the 80s, saw a chance to expand their businesses.

But new companies were also able to cash in. In the US, companies like Blackwater - set up by an ex-US Navy Seal - expanded massively and gained notoriety for their gung-ho attitude to operations.

Image caption, Graham Binns retired from his position as a major general in the British Army earlier this year

On the British side, Aegis grew exponentially on the back of lucrative contracts with the US Defense Department, providing security for its engineers as they attempted to rebuild Iraq's battered infrastructure.

At the height of the "Iraq bubble", as the period is now known in the industry, up to 100,000 private security contractors were estimated to have been working in Iraq.

Industry watchers suggest that by 2004, the global private security industry was worth $100bn (£63bn) a year.

Value for money?

In the UK the boom meant that, at its height, there were about 60 PSCs, with the industry second only to the US on the global stage.

The numbers have since fallen back, but Aegis remains one of the big players, alongside Armorgroup (now a part of the security giant G4S), Control Risks and Olive Group.

The company boasts offices around the world, in London, Washington, Baghdad, Kabul and Bahrain.

But Iraq and Afghanistan - where private security companies have once again been called on to aid rebuilding - are still central to Aegis's business.

Image caption, British private security companies have a significant presence in Iraq and Afghanistan

And the US government remains its biggest customer. Today in Iraq, for example, Aegis is responsible for protecting the top officials of the US army.

That the US army relies on a private British company to provide security for its own officials indicates how commonplace the use of PSCs now is in the US military.

Mr Binns says that for major governments there is an "increasing willingness" to turn to private security firms for cost and convenience reasons, and the US is leading the way.

PSCs, he says, represent value for money for cash-strapped governments.

"With a contractor you can hire them, and then you can dispense with their services quickly.

"So you can grow a capability and you can remove a capability quicker than you can if they are government servicemen."

Andy Bearpark from the BAPSC agrees.

"Certain activities can be done much more cost-effectively by the private sector," he says.

"There is now a constant pressure to downsize the size of the armed forces. But at the same time those military forces are becoming much more expensive per unit cost as every year goes by."

Even the UK, which Mr Binns admits has been "more reluctant" to use contractors than the US, is making use of these private armies.

Last year the Foreign Office (which is responsible for PSC contracts) spent a total of £51m on PSC contracts in Afghanistan and Iraq.

£27m was spent in Afghanistan alone, with Armorgroup and its new owner G4S pocketing all but a few hundred thousand pounds of it, primarily for protecting UK embassies and diplomats.

In Iraq Control Risks earned a healthy £16.8m for providing mobile security, out of a total spend of £24m.

'Outsourced war'

But even if it is cost effective, using a private army to do the job your national army would normally do does not sit well with many.

Earlier this year a United Nations working group warned of the "global trend toward the increased privatisation of war and security", security companies' "lack of accountability" and the impact this could have on human rights.

Better regulation has been the call from some think tanks, including the International Peace Institute, and last year the government made some tentative moves towards stricter rules.

Image caption, Graham Binns (far left) hands over Basra to Iraqi security forces in 2007

Concerns over corruption and the lawlessness of the Iraq bubble explain some of those concerns.

But there is also a wider moral argument over how far private security companies should be allowed to go.

Letting PSCs have a hand in nation-building, academics like Chatham House's Dr Paul Cornish argue, blurs the lines between what private companies do and do not have the right to do.

A country, the argument goes, has the right to declare war and mobilise an army. A private company does not.

For lifelong army men like Graham Binns, there is no question of letting PSCs, even Aegis, send troops into battle.

He points out that there is a line between combat roles that soldiers have and the support roles that PSC personnel take up. The line, he stresses, should never be crossed.

"I think to engage in combat is inherently military and it is the responsibility of a sovereign government," he says.

"I cannot imagine that the UK or the US would wish to delegate that responsibility to a contractor. That's just not a business that I would wish to be involved in."

So if raising a private army is not the objective, what is the future for the UK's private security industry nearly half a decade on from the Iraq bubble?

Mr Binns is optimistic. "I think the market will change, and over time the nature of the security provision will change as the security situation improves and the ability of Iraqi security forces increases," he says.

"The market will evolve, but there is a sustainable business there."

As Andy Bearpark from the BAPSC puts it: there are still plenty of dangerous places in the world.

"It's easy to rule out the safe places in the world. Once you've done that, it's a very different picture."

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