Labour calls Serco's decision to pay millions to investors 'outrageous'

The Labour leader, Sir Keir Starmer, has criticised Serco’s decision to hand investors millions in dividends after enjoying a bumper year boosted by its £350m contract to run the heavily criticised NHS Covid-19 test-and-trace programme.

The outsourcing giant has announced it is to resume dividend payouts after a seven-year interval, with a £17m distribution, following a pandemic year in which profits almost doubled.

Following publication of Serco’s annual results on Thursday, Starmer tweeted: “Outrageous. Taxpayers’ money shouldn’t be given to Serco’s shareholders via dividends.”

Thanks to a series of government contracts, Serco runs a quarter of testing sites across the UK and provides call handlers for the NHS’s contact-tracing programme.

“The government should have placed test and trace in the hands of our NHS and local communities,” Starmer added.

Serco played down the impact of pandemic contracts on its results, saying the work accounted for just 1% of underlying profits. It reported pre-tax profits of £153m last year, up from £80.7m in 2019, as revenues surged by a fifth to £3.9bn.

Rupert Soames, Serco’s chief executive, said the board had thought carefully about reinstating a dividend “in light of the current circumstances”. He said it was the right thing to do for investors, given that Serco had repaid all government employment and financial support and awarded a £100-a-person bonus to 50,000 frontline staff in recognition of the “intense pressure and extra work” during the pandemic.

“Dividends should normally be paid by companies – dividends, after all, are what pay people’s pensions,” Soames told BBC Radio 4’s Today programme. “It is fair that shareholders who over the last five years have come to the rescue of Serco and put in £800m of equity should be allowed a dividend.”

Related: Serco profits surge thanks to Covid-19 test-and-trace contract

Soames defended the test-and-trace scheme, saying that while it had endured a “bumpy start”, such a system had “never been done before in the UK”.

He said: “As of last week, there are as many people being tested every week as we’ve vaccinated – about 2.5 million people a week. In the first week of January there were about 1 million people who were traced through the system.”

Serco’s share price rose by more than 4% following the publication of its annual results.

It is one of five companies running Covid-19 testing sites. Last week it emerged that almost 4,000 Amazon workers were given the wrong coronavirus test results after a mistake by test and trace. Concerns have also been raised by some healthcare professionals about the use of outsourced, inexperienced call centre staff in roles better suited to clinically trained experts.

Last week Serco announced it was expanding its defence business, buying the contractor Whitney, Bradley and Brown, which has clients including the US air force, for £212m.