Defence boosts Serco amid asylum hotel decline
Government defence contracts helped Serco deliver a higher profit in 2025 despite a drop in the use of migrant hotels, once a key revenue stream for the London-listed company.
Serco, an outsourcing company that covers government work on everything from migrant hotels to waste collection, was boosted by higher state expenditure both in the UK and Europe last year.
Its revenue, which mainly derived from winning new contracts over the year, hit £4.9bn. Defence represented the largest source of revenue at £1.7bn over the year.
In 2024, the justice and immigration sector provided Serco with its largest chunk of income at £1.7bn, though that has now fallen to just under £1.6bn.
Bosses said a new string of contracts won in the defence sector, including in helping UK forces to set up technology platforms, “more than offset” a decline in revenue from immigration-related contracts.
Defence recruitment contracts worth more than £2bn across the Royal Navy and armed forces were among those that drove stronger order intakes.
As a result of bigger contract wins in areas such as defence and citizen services, which includes management of the London Cycle Hire scheme, the company posted a jump in profit from £44.5m to £145.6m.
Pre-tax profit was £201.5m while operating profit over the year was reported at £246.3m.
Anthony Kirby, Serco chief executive, said: “Pressures are increasing on governments to do more and better for less – we stand ready to support them in doing just that.”
Defence offsets fall in asylum hotel income
It came as the government revealed that the number of asylum seekers staying in hotels, which cost taxpayers more than other types of accommodation, had sharply dropped by 19 per cent on the year to 31,000.
The number has broadly declined over the last couple years since a peak of over 56,000 in late 2023.
Serco, along with two other hotel providers in Clearsprings Ready Homes and Mears, have come under scrutiny from government officials over profits gained from the hotels.
A report by MPs on the home affairs committee said last year that the Home office had squandered more than £15bn on “failed” and “chaotic” asylum hotels since 2019 through long-term contracts with the three providers.
The company has said burgeoning profits over the years have come as a result of wider gains in various areas beyond hotels. It warned that its immigration portfolio was set to decline in the middle of last year though suggested revenue had fallen at a lower rate than expected.
Income from immigration services in the UK are expected to decline by some £100m. Serco also works with landlords to house asylum seekers through its rental properties.
The firm boasted new contracts with the US Department of War, Dubai Airports and the Australian Defence Force. Its order intake last year came in at £5.5bn, with the UK and Europe covering 70 per cent of the contract awards over the year.
Serco said it expected revenue to remain broadly flat over the coming year while net debt levels would be reduced to around £165m.
Its share price dropped by more than three per cent after markets opened on Thursday.