Axing of Child Trust Funds hits Capita
Share
The Government’s decision to scrap Child Trust Funds is a blow for Capita, which administers 35 per cent of the market, while other outsourcing firms are set to be hit by the Government’s plans to save £1.7bn by cancelling contracts.
Capita’s share price dropped from 796.5p at the start of trading yesterday to 765p at the opening of the markets this morning, however it has since rallied to 772p (as at 9.50am).
Capita also has a 10-year contract with the Criminal Records Bureau, thought to be worth £400m, but the Home Office has not yet announced the detail of which contracts could be under threat as it looks to cut £74m of its discretionary spending this year.
Outsourcing firm Serco is also facing uncertainty as it has around £500m of contracts delivering the Flexible New Deal with the Department for Work and Pensions.
The DWP is set to cut £535m of its spending.
It says it is cutting £200m through back-office and departmental efficiencies, £70m by stopping or delaying some IT projects and reducing spending on IT consultancy and £25m by renegotiating contracts on medical and IT services.
It is also saving £85m by reducing spending on discretionary areas such as marketing, travel and research, £15m by freezing almost all recruitment across the department and £5m from reducing the size of its estate.
The DWP says: “The remaining £335m will primarily come from refocusing recession measures where we believe we can make taxpayers’ money go further and benefit more people.”
A DWP spokeswoman says this includes scrapping all further allocations to the Future Jobs Fund, an end to the £1,000 recruitment subsidy offered to employers who recruit someone who has been out of work for over six months and ending the contracts of some temporary staff.
A spokeswoman for Capita says: “Our clients span both the private and public sectors with central government contracts representing only 10 per cent of our annual revenues.
“All our service agreements are underpinned by commercial contracts which outline both the cost savings and service improvements that we have agreed to deliver.
“We have not had any discussions with the coalition government regarding our existing central government contracts. Outsourcing back office and frontline customer services already delivers cost savings to Government and going forward can play a key role in helping the Government reduce the fiscal deficit while maintaining the quality of frontline services.”
If you enjoyed this article, sign up here to receive daily email updates from Money Marketing and Follow @_moneymarketing
