𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

Capita has warned over an earnings hit of up to £40 million this year due to a raft of contract failures on the UK’s Civil Service pension scheme.

The outsourcing giant said it is taking actions to offset the impact but expects underlying operating profits to be knocked by between £25 million and £40 million in 2026 from the contract.

Shares in the group slumped to their lowest level in nearly a year, down another 18%, in Wednesday morning after the trading update, following steep falls earlier this week as the extent of the contract issues was laid bare.

The firm faced a grilling from MPs in a Commons committee hearing on Wednesday, with chief executive Adolfo Hernandez reiterating apologies for delays in administering the 1.7 million-member pension scheme, which has left thousands of civil servants waiting for payments and retirement quotes.

The Public Accounts Committee questioned whether the firm sees the Government as a “cash cow to be milked to the point of dropping from exhaustion”.

The Cabinet Office said more than 6,700 quotations for past retirement dates and 4,100 bereavement cases were outstanding on the scheme.

Capita failed to meet a deadline of June 30 to deliver the terms of the £239 million pensions contract after missing earlier targets.

The Government has withheld nearly £10 million in payments to Capita for its poor performance over the Civil Service scheme and the firm is facing mounting calls to be stripped of the contract.

Mr Hernandez said: “We recognise the service on Civil Service Pension Scheme has not been good enough, we are working closely with the Cabinet Office on all aspects of the scheme, and this remains our number one priority.

“The wider group continues to perform robustly, and we are confident in the actions we are taking to build a simpler, more focused Capita.”

The firm said its free cash flow will also be impacted by £35 million to £50 million from the pensions contract issues and investment needed to resolve the problems.

The Paymaster General and Cabinet Office minister Nick Thomas-Symonds has vowed to recover “every single penny” from Capita after the Government had to bring in a 140-strong team of civil servants to help clear the backlog of work.

He told the committee on Wednesday the Cabinet Office was sanctioning Capita “every single month” while it is failing the terms of the contract, which was signed by the previous Conservative government in 2023.

In its trading update, Capita said as well as financial sanctions being imposed by the Government for the failing contract, it is also facing higher costs as it steps up efforts to work through outstanding cases.

“As we continue to focus our efforts on the Civil Service Pension Scheme contract, we are seeing some impact to services delivered in our pension business, including the higher margin pension consulting business, and cost efficiencies have not been delivered in line with the phasing previously assumed,” it added.