Serco shares jump to 14-month high as government awards decade-long asylum seeker housing contracts worth billions

Outsourcers Serco and Mears have been tasked with providing a decades-worth of accommodation and support for asylum seekers across the UK, in a string of billion-pound contract awards.

The 10-year contracts, worth £1.9bn for Serco and £1bn for Mears, bumped both companies’ share prices up around seven per cent today.

Home Office minister Baroness Susan Williams announced the awarding of the new so called Asylum Accommodation and Support Services Contracts (AASC) contracts this morning, which will replace the current services contract framework in April.

Williams said: “This system includes supporting asylum seekers who would otherwise be destitute while their asylum claim is assessed.

“We will be working extremely closely with local authorities to ensure a smooth transition and will be involving them ever more closely in the operation of the new contracts as they go live.”

But competition was not fierce for the contracts, which few private sector companies bid for, City PM understands.

The total worth of the contracts to house asylum seekers is around £4bn, sources told Reuters, but last year’s collapse of outsourcer Carillion as well as several other high-profile contract failures has made outsourcers more cautious about bidding for riskier contracts.

Rupert Soames, Serco chief executive, said: “We are very pleased to have been awarded contracts for two large regions by the Home Office; together these will be the largest contracts by value ever awarded to Serco.”

Serco said it stood to make about £150m annual revenue from the contract, despite making £15m losses on the previous contract it held last year.

The announcement sent Serco shares to a 14-month high of 110.8p.

David Madden, analyst at CMC Markets, said: “Not only is the contract a steady income stream over the next decade, it also underlines the governments confidence in the company – and given the pressure the firm has been under in recent years, the award is welcomed by Serco.”

In the regions for which Serco has been selected – the north west, the Midlands and the east of England – there are currently approximately 20,000 asylum seekers living in more than 5,000 homes.

Mears, an outsourcer which provides housing management and care services for local authorities and housing associations, has won the contracts for Scotland, Northern Ireland and the North East, Yorkshire and the Humber.