Serco: FTSE 250 firm predicts £20m hit from Budget tax changes
British outsourcing giant Serco has warned the tax changes outlined in the UK’s Autumn Budget last month will drive up costs by as much as £20m across the group.
The group informed its shareholders this morning that the combination of the lower threshold of national insurance contributions and increased employers’ national insurance tax rate, set to rise from 13.8 per cent to 15 per cent will increase its labour costs.
It estimated the direct additional labour costs to be around £20m per year, with the changes set to take effect from April 2025.
Serco said it is “actively exploring ways to offset these costs”.
This comes as the group also announced it had lost a rebid for an immigration detention facility and detainee services contract in Australia.
The end date of the current contract is 10 December 2024. The group stated it “submitted what we believed to be a compelling bid.”
If the contract had been retained, the group would have expected it to contribute around £165m of revenue in 2025 and £18m of underlying operating profit.
However, in accordance with its normal accounting policy, it anticipates one-off end-of-contract cash costs of around £20m, which have already been provided for.
It’s not just Australia, where the group has been losing out recently. It was revealed by City PM last week that Serco has launched legal proceedings against the UK government over missing out on a prison services contract.