Several of Britain's largest companies are experiencing a significant boost in their stock performance, fueled by substantial government contracts across infrastructure, defense, and outsourcing sectors. This surge in public spending has led to considerable gains for shareholders, with many of the top government suppliers seeing their share prices rise sharply.
Balfour Beatty, a prominent construction firm, has emerged as a leading beneficiary, with its shares more than doubling since July 2024. The company's involvement in major projects such as the HS2 high-speed rail line, the Hinckley Point and Sizewell nuclear power stations, and the Lower Thames Crossing road scheme has contributed to its success. In the 2024-25 fiscal year, Balfour Beatty secured £3.1 billion in direct public sector revenue, the highest among all government suppliers, according to data provider Tussell. This figure represents a significant portion of its total £10.7 billion turnover.
Kier, another construction firm and HS2 contractor, has also seen its shares increase by nearly three-quarters in just over two years. Kier has reported substantial taxpayer-funded revenues of £2.4 billion and is involved in projects including prisons, hospitals, and nuclear power facilities. The company recently indicated that its results would meet the upper end of expectations, with a significant portion of its projected revenue for the year ending June 2027 already secured.
Defence companies are also capitalizing on increased military spending. BAE Systems, Babcock, and Serco have all benefited from a global rise in defense stocks, driven by government commitments to enhance military and cybersecurity capabilities. These three companies collectively generated £3 billion in revenue from UK government contracts in 2024-25. The long-term nature of defense contracts provides high earnings visibility, a factor valued by investors.
The technology services group Computacenter has also seen its shares perform strongly, partly due to the boom in artificial intelligence. The company assists organizations like the police and the National Health Service with their digital systems and recently joined the FTSE 100 index. Overall, the share prices of the top ten public sector contractors have risen at more than double the rate of the FTSE 100 index since the current government took power.
However, not all government contractors have shared in this success. Capita, an outsourcing firm, experienced a significant drop in its share price after disclosing that the costs associated with addressing service shortfalls in the civil service pension scheme could reduce annual profits by up to £40 million. The company is currently facing challenges related to pension payment delays affecting retired government officials, leading the government to withhold multi-million pound payments. Capita's chief executive stated the company's focus is on rebuilding trust and reputation.
The government's spending on consultants has also drawn attention. The award of up to £465 million to accountancy firms KPMG and EY to train civil servants in areas including artificial intelligence has surprised Whitehall observers, particularly given a previous pledge to reduce consultant spending.