Several of Britain's largest companies have experienced significant gains in their stock prices, driven by a surge in government-funded infrastructure, defense, and outsourcing projects. An analysis by The Financial Mail on Sunday indicates that ten of the largest publicly listed government suppliers have seen their share values rise under the current Labour government, with one notable exception.
Balfour Beatty, a construction firm, has emerged as the top performer, with its shares more than doubling since July 2024. The company's major contracts include work on the HS2 high-speed rail project, new nuclear power stations at Hinckley Point and Sizewell, and the Lower Thames Crossing road scheme. In the 2024-25 fiscal year, Balfour Beatty secured £3.1 billion in direct public sector revenue, according to government procurement data provider Tussell. This represents a substantial portion of its total turnover of £10.7 billion. Analysts note that Balfour Beatty, along with rivals like Kier, has improved its financial standing and business structure, leading to a re-evaluation of its stock.
Kier, another construction company involved in the HS2 project, has also seen its shares increase by nearly 75% in just over two years. The firm, which also undertakes work on prisons, hospitals, and nuclear power stations, reported that its results for the year ending June 2027 are expected to be at the higher end of forecasts, with 90% of its estimated £4.4 billion in revenues already secured.
Defense companies are also benefiting from increased military spending. BAE Systems, Babcock, and Serco have all experienced a rise in stock value as global governments commit to greater expenditure on military and cybersecurity capabilities. These three defense contractors collectively generated £3 billion in revenue from UK government contracts in 2024-25. The long-term nature of defense contracts provides investors with a high degree of earnings visibility.
The technology services group Computacenter has also seen its shares surge, partly fueled by the boom in artificial intelligence. The company, which recently joined the FTSE 100 index, provides digital systems support to organizations such as the police and the National Health Service.
Overall, shares in the top ten public sector contractors have outperformed the FTSE 100 index since the Labour government took power, more than doubling its rate of growth. Market observers attribute these gains to increased investor confidence in the earnings outlook, financial stability, and strategic direction of these companies.
However, not all government contractors have fared well. Capita, an outsourcing firm, has faced significant challenges. Its shares fell by over 20% after the company announced that rectifying issues with the civil service pension scheme it manages could reduce annual profits by up to £40 million. Thousands of retired government employees have experienced delays in receiving their pension payments, prompting the government to withhold payments to Capita due to service deficiencies. Capita's chief executive stated that the company's focus is on rebuilding trust and reputation.
In contrast to the financial gains reported by many, Capita's struggles highlight that public sector contracts do not always guarantee a smooth financial return, and failures can have considerable real-world consequences.