Asylum housing provider Clearsprings’ profits jump on high demand

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High demand for asylum accommodation has driven a jump in profits at housing provider Clearsprings, just as new Labour ministers look to clamp down on the company’s profits.

Privately owned Clearsprings, which directly manages and subcontracts asylum accommodation for the government, reported on Thursday that profits before tax soared 60 per cent to £119mn during the year to January.

The Essex-based group said that “political and economic upheavals in many countries have driven a high number of asylum applications within the UK”, meaning that “demand for accommodation for asylum seekers including contingency accommodation such as hotels has remained high”.

The bumper profits risk fuelling the Labour government’s concerns about the vast amount of money paid to private companies to handle the expensive but politically sensitive issue of housing asylum seekers, including in hotels.

The Financial Times reported last week that newly appointed Home Office ministers were “shocked” by the profits made by companies including Clearsprings on multiyear contracts signed by the previous Conservative government. They now hope to use break clauses in 2026 either to revise the original terms or terminate the contracts, said two people briefed on their thinking.

The previous government overhauled the procurement of asylum accommodation in 2019, handing multiple 10-year contracts to three companies — Serco, Mears and Clearsprings. The contracts will lead to an estimated total payout of £4.6bn, according to government procurement data provider Tussell.

Clearsprings, whose main source of business has become asylum contracts with the Home Office, has since seen its pre-profits multiply more than 300 times from just £369,209 during the year to January 2019. 

The group’s operating margin has risen from 0.6 to 6.7 per cent over the same period.

But Clearsprings, which arranges housing and transport for asylum seekers across Wales and the south of England, warned on Thursday that “government legislation and policy are designed to reduce the number of asylum applicants arriving in the UK”.

“Some reduction in the numbers accommodated in [the] future is anticipated,” it added.

Amid social tensions over migration that escalated into this summer’s far-right riots targeting buildings housing asylum seekers, the government has vowed to end the use of hotels and mass accommodation sites.

Reliance on hotels amid a backlog of asylum claims has driven accommodation and support costs from £17,000 per person in 2019/20 to £41,000 during the most recent 12-month period, according to analysis published last week by the Institute for Public Policy Research.

The think-tank with links to the Labour party called for a reversal of nationwide outsourcing to private companies as it criticised “unsanitary living conditions”, adding that budgets and powers could be decentralised to regional authorities.