The UK government is to pay accountancy firms KPMG and EY up to £465million to train civil servants in skills including artificial intelligence, the biggest such award to any of the big four accountancy firms since at least 2012, despite a pledge from Labour when it came to power two years ago to halve spending on consultants.
But accountants are not the only ones benefiting from taxpayer-funded contracts. Some of Britain's biggest companies are also cashing in on a series of major infrastructure, outsourcing and defence projects funded by the public purse. With one exception, the ten biggest suppliers to the government listed on the stock market have seen their share prices soar under Labour, according to an analysis by The Financial Mail on Sunday.
Balfour Beatty leads the pack
The biggest winner is construction firm Balfour Beatty, whose shares have more than doubled since July 2024. Its major contracts include the HS2 high-speed rail project between London and Birmingham, new nuclear power stations at Hinkley Point and Sizewell, and designing and building the Lower Thames Crossing road scheme.
Balfour Beatty netted £3.1billion of direct public sector revenue in 2024-25, according to government procurement data provider Tussell, the highest of any supplier. That is a large share of its total turnover of £10.7billion, especially given that Balfour Beatty, like many of the state's biggest contractors, also earns substantial sums from its activities abroad, particularly in the United States.
Dan Coatsworth, head of markets at broker AJ Bell, said Balfour Beatty used to be viewed as a risky contractor with weak cash conversion and a habit of issuing profit warnings.
Kier and the construction boom
Also enjoying the public spending spree is Kier, a rival builder and another HS2 contractor with £2.4billion of taxpayer-funded revenues, whose shares have jumped by almost three-quarters in just over two years.
Coatsworth said Kier was dogged by high levels of debt and a muddled business structure in the past, but added that both it and Balfour Beatty had sorted themselves out, driving a major share re-rating.
Kier, which also works on prisons, hospitals and nuclear power stations, recently said results would be at the top end of expectations, with 90 per cent of its estimated £4.4billion of revenues for the year to June 2027 already secured.
Defence spending drives BAE, Babcock and Serco
Defence companies also feature prominently as military spending ramps up. Coatsworth said BAE Systems, Babcock and Serco had all ridden the boom in defence stocks as investors grew excited about governments around the world pledging to spend more on military and cybersecurity capabilities.
The defence trio had combined revenues of £3billion from UK government contracts in 2024-25, according to Tussell. The spending spree is set to continue, as defence contracts, like much public sector work, tend to be long-term, meaning earnings visibility is high, something investors value.
Doubts remain, however, over how Chancellor John Healey will plug an estimated £5billion funding gap in the Defence Investment Plan over the next four years, let alone meet its NATO target of spending 3.5 per cent of annual output on the military by 2035.
Computacenter rides the AI boom
The boom in artificial intelligence has turbocharged shares in technology services group Computacenter, which recently joined the FTSE 100 index of the largest UK stock market-listed companies. The company helps large organisations such as the police and the NHS build and run their digital systems.
Taken together, shares in the top ten public sector contractors have risen at more than twice the rate of the FTSE 100 since Labour came to power. Coatsworth said the common theme uniting most of these names was success in convincing the market they were no longer dragging their heels as businesses, which he called a massive driver of share price gains as investors grew more confident in their earnings outlook, financial position and strategic potential.
Capita the exception
The only one to miss out on the bonanza is Capita, the outsourcing firm that has become a byword for controversy. In the latest crisis, its shares crashed by more than a fifth after it revealed the bill for cleaning up the mess at the civil service pension scheme it runs could knock up to £40million off annual profits.
Thousands of recently retired government officials have yet to receive their first pension payment, leaving some struggling to pay bills and buy food.
Capita chief executive Richard Holroyd told MPs he had considered resigning over the debacle, which has seen the government withhold multi-million pound payments to the company because of the service shortfalls.
Holroyd told the Public Accounts Committee there was no profit motive or profit driver in the situation, and that the company had to rebuild trust. He said Capita was thinking about its reputation across the rest of the business and how it could recover.
Not all public sector contracts are a one-way gravy train. When some hit the buffers, they can have dire real-world consequences.
