Serco and Mears have won contracts from HM’s Government totalling £2.9 billion from the British coffers to provide accommodation and support for asylum seekers, the move has seen shares in both outsourcing firms rise.
The contracts that are valued at 1.9 billion GBP for Serco and 1 billion GBP for Mears, are set out over 10-year and were awarded by Britain’s Home Office Visas and Immigration department under the Asylum Accommodation and Support Services Contract (AASC).
As a result of the contracts, shares in Serco were up 6.5 percent at 108.8 pence at 1253 GMT on Tuesday, while Mears rose 6.2 percent to 360 pence on news of the new contracts.
The British government is awarding contracts worth a total of £4 billion to house asylum seekers, the sources told Reuters, but last year’s collapse of Carillion has dampened appetite for riskier projects.
Serco bid for parts of the Asylum Accommodation and Support Services Contract (AASC) despite having hundreds of millions of pounds in losses in 2016 from its predecessor, when refugee arrivals and costs outstripped budgets baked into fixed contract terms.
“The hope is that … the risk/rewards on this contract are much more attractive. The structure of the new contract is very different and does not have volume risk and the same level of penalties,” Liberum analysts said.
The annual revenue from the new contract is expected to be about 150 million pounds for Serco in 2020, compared to about 70 million pounds in 2018 on the previous version of the contract.
“In 2020 and thereafter we expect the AASC contracts to be materially positive to both profitability and cash flow”, Serco said in a statement.
Serco has won the contract for the North West of England and the Midlands and East of England regions, where about 20,000 asylum seekers are living while Mears has been awarded contracts for Scotland, Northern Ireland and the North East, Yorkshire and the Humber.
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Editor-in-Chief | Carl D. Pearson has been involved in British politics and media from an early age, with the key knowledge of what it takes to run a news organisation for the 21st century. Mr Pearson, as Editor-in-chief, is responsible for supervising the daily tasks of publishing media and content to UNN’s website and various platforms.
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