Serco loses £165m Australian contract, estimates big hit from NI tax changes

The public sector-focused outsourcing group said it has been unsuccessful in rebidding the contract with Australia's Department of Home Affairs for the provision of onshore immigration detention facilities and detainee services - a contract that it has repeatedly won since 2009.

"Our performance levels have been high on the current contract, and we submitted what we believed to be a compelling bid that would have delivered continued strong performance to the Australian government as well as meeting our framework for achieving margins appropriate for the services we deliver. We will now work to ensure a smooth transition of these critical services to the new provider," Serco said in a statement.

The contract is due to end on 10 December, but the transition-out period will last 180 days. The company said the contract would have contributed £165m in revenue in 2025 along with £18m to underlying operating profit, equal to 6% of the current consensus forecast of £282m.

"As part of general business, we planned for all scenarios related to this rebid. As a result of the outcome, we will now proceed with a change programme during the transition period," Serco said.

Meanwhile, the company said that last week's announced tax changes in the autumn budget – which lowered the earnings threshold at which employers start paying national insurance contributions from £9,100 to £5,000 and increased the rate from 13.8% to 15.0% – will increase direct labour costs by around £20m per year.

"The changes will be effective from April 2025 and we are actively exploring ways to offset these costs," the company said.