Outsourcer Serco gains £200m contract with the Royal Navy

Serco secures another £200m deal with the Royal Navy as outsourcer extends 25-year relationship

  • Serco said the new arrangement would run for 27 months from December 
  • The firm employs 650 mariners and engineers at six naval sites across the UK
  • Tug boat operations are among the services Serco provides for the Royal Navy 

Serco has been awarded a contract worth about £200million to provide ‘marine services’ to the Royal Navy.

The public sector outsourcing specialist said the new deal would run for 27 months from December, with an option for an extension lasting up to six months.

This latest contract builds on Serco’s long-running business relationship with the Royal Navy, which has lasted for over 25 years and involves operating tugboats and providing support on training exercises, among other services.

Deal: Outsourcing specialist Serco has been awarded a contract worth about £200million to provide ‘marine services’ to the Royal Navy, which will run for at least 27 months

It also follows a 15-year private finance initiative agreement, which sees the business take over responsibilities for the Royal Maritime Auxiliary Service fleet.

Serco employs 650 mariners and engineers at six naval sites across Great Britain, including the Royal Navy’s three main operating bases – Clyde, Devonport and Portsmouth – as well as some foreign operations.

Just in 2022, the FTSE 250 company has won three major contracts from the US Navy for work related to submarines, surveillance and close-in weapons systems.

These deals come against heightened tensions between NATO and Russia resulting from the country’s invasion of Ukraine. 

Various governments have committed to raising military spending in the coming years, providing a potentially windfall for businesses in the defence sector.

Outgoing chief executive Rupert Soames said: ‘Serco is delighted to be continuing to provide these vital services to support the Royal Navy.

‘We are proud of our service over the last 25 years and especially of our team, which combines decades of experience with highly specialised skills. Many of the team are Navy veterans and have longstanding connections to the national maritime community.’

A week ago, the veteran businessman, whose grandfather was Sir Winston Churchill, made more than £3million from selling the first part of his stake in Serco in anticipation of his upcoming retirement.

He will be replaced as chief executive by Mark Irwin, who runs the firm’s UK & Europe division, at the end of 2022 but will hold an advisory position until next September.

Soames, 63, is widely credited with rescuing the outsourcing firm, which he joined following a scandal where it had overcharged the UK Government tens of millions of pounds for an electronic tagging contract, severely denting its public reputation and subsequently its financial health.

As part of his turnaround measures, the firm narrowed its focus towards winning contracts in the public sector, slashed costs, sold off unprofitable divisions and initiated a £170million fund raising.

Recovery took some time, but the Hampshire-based business eventually achieved its first rise in annual turnover in six years, partly through expanding into North America and Asia, and handed shareholders their first dividend in five years.

Serco shares were down 0.4 per cent to 165.4p during the late afternoon on Wednesday, although their value has grown by nearly a quarter this year.

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