Capita says cuts will hit its revenues

City A.M. Reporter
CAPITA yesterday said revenues would be hit harder by government spending cuts than it previously expected, casting a shadow over predictions that robust support services firms stand to gain from the era of austerity.

Since the coalition was formed in May, many large support services firms such as Capita and rival Serco have sounded bullish about their ability to gain market share because of increased levels of government outsourcing.

“We indicated that pressures on public spending might potentially affect growth in the short term... This is now occurring and will subdue revenue growth in the second half of the year more than previously anticipated,” Capita said.

Capita, which processes 25m life, savings and pensions policies and handles complaints for the BBC, said revenue growth would be modest because many existing contracts would not be renewed or offset with new deals, and because fewer contracts had been signed in the second half.

The support services sector’s largest players had been expected to cash in on the cuts because of their penetration, size and diverse list of services.