MarketLine Blog

Serco: A relatively unknown billion pound company

The UK based service company Serco, is a large services business entity that in popular UK media is a relatively low key and unknown business. Despite this the company is one of the key contractors in the UK and is widespread internationally. In 2012 the company turned over £4.9bn (approximately $7.4bn), with net income of £245.3m (approximately $374.2m) which is clear evidence of its scale and scope. Serco has an incredibly diverse business profile, but its key business area is providing governments with private sector contractor options, outsourcing essentially. The company, in a similar way to the security and services firm G4S, has been able to latch onto the global trend for governments to reduce their domestic services commitments and send the business world lucrative contracts to take over these commitments. Some of the company’s huge contracts include the running of certain prisons, immigration centres, offender tagging services, the running of London’s “Boris Bikes”, school inspection services, management of a UK early warning ballistic missile system, maintenance of the UK’s nuclear deterrent and some NHS services and facilities.

The ambition and direction of the company is becoming clear in its manoeuvring to control more and more of the UK’s NHS contracts, in line with a recent government trend to privatise many NHS services. It is increasingly likely that companies like Serco will find themselves running major government NHS contracts in the near future and Serco already holds one such contract. According to the Guardian Newspaper, the company is also set to bid on the largest of these privatization schemes to date. The running of the Cambridgeshire and Peterborough health services for older people contract is estimated to be worth up to £1bn (Approximately $1.63bn). Despite the fact that much of the company’s revenue is generate in the UK, there is still a large portion of the company which holds similar government contracts all over the world. Some of these include air traffic control in the UAE, parking meter services in Chicago, and immigration and detention services in Australia.

Some commentators have remarked glibly that Serco runs the UK and without the company the UK would struggle, so you would be forgiven for thinking that the company has had an easy road to becoming a billion pound business. However, this transition of services from governmental run to privately run is rarely completely smooth and just like its fellow services company G4S, Serco has suffered from numerous controversies in the way it runs its contracts. The company’s prison contracts have been criticised, with one in particular coming under fire from prisoners’ rights groups. The company has also had issues with over charging on one of its tagging contracts in the range of millions and is being investigated for this currently. Companies such as Serco are likely to be investigated in a more in depth way in the future as the National Audit Office attempts to get to grips with the extent of their world-wide deployment. These controversies are, however, unlikely to quench the thirst of governments for handing over expensive services to the private sector.

For further information please see our ‘Serco Company Profile‘. You may also like our ‘Business case study on G4S‘.

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