Recommendation factsheet 2025
Published 14 March 2025
© Crown copyright 2025
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gov.uk.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at https://www.gov.uk/government/publications/2025-contract-profit-rate-assessment/recommendation-factsheet-2025
Under the Defence Reform Act 2014, the SSRO must provide the Secretary of State with its assessment of the appropriate rates used to determine the contract profit rate for pricing qualifying defence contracts and qualifying sub-contracts. For further information on the methodology used to calculate these rates please see the Single Source baseline profit rate and capital servicing rates methodology.
Baseline Profit Rate
The baseline profit rate is step 1 of the four-step process for determining the contract profit rate for a qualifying defence contract.
The baseline profit rate is calculated from an index of public and private companies. The underlying rate is the median capital servicing adjusted profit on cost of production of the group. The baseline profit rate is the rolling average of the underlying rate.
| 2021/22 | 2022/23[1] | 2023/24 | 2024/25 | 2025/26 | |
|---|---|---|---|---|---|
| Underlying rate (unadjusted for capital servicing) [2] | 9.59% | 8.24% | 9.50% | 9.31% | 10.60% |
| Capital servicing adjustment | -1.40% | -0.89% | -1.06% | -1.22% | -1.46% |
| Underlying rate | 8.19% | 7.35% | 8.44% | 8.09% | 9.14% |
| Baseline profit rate recommended by the SSRO; rolling average of the underlying rate[3] |
8.31% | 8.07% | 8.29% | 8.24% | 8.56% |
Note: The 2021/22 to 2024/25 rates are based on the composites of the ‘Develop and Make’ and ‘Provide and Maintain’ activity groups; while the 2025/26 rates are calculated from the ‘Develop, Make and Support’ activity group.
[1] Shown are the 2022/23 rates recommended by the SSRO. The Secretary of State determined the BPR for 2022/23 as an average of the composite underlying rates calculated by the SSRO for the three years prior to 2021 (8.50%, 8.23%, and 8.19%), keeping the BPR at 8.31 per cent.
[2] The capital servicing adjustment accounts, at an aggregate level, for different levels of capital employed across the companies in the index and so sets a baseline upon which step 4 of the contract profit rate applies.
[3] A four-year average was used for 2022/23; a three-year average for pre-2022/23 and a three-year average (excluding the 2022/23 underlying rate) for 2023/24 onwards. The pre-2021/22 underlying rates used for the three-year average were: 2019/20: 8.50%, 2020/21: 8.23%.
Median capital servicing adjusted return on cost of production
Baseline profit rate activity types
The underlying rate for 2025/26 is calculated using companies in the ‘Develop, Make & Support’ activity group. Companies undertaking comparable activities considered as ‘Develop, Make & Support’ are expected to engage in manufacturing and the design; and development contributing to that process and delivery of services to ensure the availability of an asset through repair and servicing to third party equipment. This would therefore not include manufacturing on behalf of a hiring firm that supplies the design, or those solely undertaking research or design work with no associated manufacturing. Where development activities do not seek to result in a novel or differentiated product the company is less likely to be considered comparable.
The baseline profit rates for 2016/17 to 2024/25 were a composite that combine the results from the ‘Develop and Make’ and ‘Provide and Maintain’ activity groups. For the 2025/26 rates assessment these groups are no longer assessed and have been replaced by Develop, Make and Support. The 2025/26 baseline profit rate assessment is calculated as a three-year average of FY2023[4] ‘Develop, Make and Support’ underlying rate, and the historical FY2022 and FY2021 composite underlying rates. Further information on this change can be found in the published Q&A document.
[4] FY2023 means the latest year ending on or before 31 March 2024 that is addressed by the financial statements of each comparator company. For most comparator companies this is the year ended 31 December 2023, but some company financial statements cover different time periods, for example the year ended 31 March 2024, or the year ended 30 June 2023.
Data sources
For further information on the data selection approach please see section 7 of the Single Source baseline profit rate and capital servicing rates methodology. A company update search of the Orbis database was carried out on 1 November 2024 on data update number 354001 using software version 354. The financial data for the calculation was extracted from Orbis at the same time.
Proportion of companies by country
Proportion of companies with defence keyword
Supplementary statistics
| Number of companies | 261 |
| of which profit making | 228 |
| Aggregate turnover (£billions) | 1,184 |
| Total capital employed (CE) (£billions) | 275 |
| Average company CP:CE ratio | 3.80 |
Source: Orbis (Cash figures shown in rounded GBP Billions)
Names of companies in the index
| Aaon INC |
| AAR Corp |
| AB Volvo |
| Accuracy International Limited * |
| Aerovironment, Inc. * |
| Aguirre Maquinaria Agricola SL. |
| AIR Industries Group * |
| Airbus SE |
| Airtanker Holdings Limited |
| Airtanker Services Limited |
| Alamo Group INC |
| Alimak Group AB |
| Allient INC |
| Allison Transmission Holdings, Inc. |
| Alstom S.A |
| American Axle & Manufacturing Hldngs INC |
| Ametek INC |
| Amtech Systems INC * |
| Analog Devices INC |
| Andritz AG |
| Archrock, Inc. |
| Ascent Flight Training (Holdings) Limited (J) |
| Astec Industries INC |
| Astronics Corporation * |
| Astronova, Inc. |
| Atkinsrealis Group Inc. |
| Atlas Copco AB |
| ATS Corporation |
| Aumann AG |
| Avant Tecno Oy |
| Avon Protection PLC * |
| Axcelis Technologies INC |
| Axon Enterprise, Inc. |
| Azkoyen SA |
| Babcock & Wilcox Enterprises, Inc. |
| Babcock International Group PLC |
| BAE Systems PLC |
| Bailey Trailers Limited |
| Barco NV |
| Barnes Group INC |
| Binder + Co AG |
| Bittium OYJ * |
| BK Technologies Corporation * |
| Blue Bird Corporation |
| BMI Trailers Limited * |
| Boeing Company (The) * |
| Broadwind, Inc. |
| Bruker Corporation |
| Brunvoll Holding AS |
| BWX Technologies Inc. |
| C.M.A. - Costruzioni Montacarichi ED Ascensori - Societa’ A Responsabilita’ Limitata |
| Cactus, Inc. |
| CAE INC * |
| Carver Group Limited |
| Castledon LTD |
| Caterpillar INC |
| Ceco Environmental Corp. |
| Chart Industries INC |
| Chemring Group PLC |
| Cicor Technologies LTD (J) |
| CMZ Machine Tool Manufacturer Sociedad Limitada. |
| CNH Industrial N.V |
| Coda Octopus Group, Inc. |
| Cognex Corp |
| Coherent Corp |
| Cohort PLC |
| Colosio S.R.L. |
| Columbus Mckinnon Corp |
| Commercial Vehicle Group, Inc. |
| Comtech Telecommunications Corp * |
| Construcciones Y Auxiliar de Ferrocarriles, S.A. |
| Continental AG |
| CPI Aerostructures INC |
| CTA International SAS |
| CTT Systems AB |
| Cummins Inc. |
| Curtiss Wright Corp |
| D.R.A. LTD * |
| Data I/O Corp |
| David Ritchie (Implements) Limited |
| de Lorenzo S.P.A. |
| Deere & CO |
| Deutz AG |
| Douglas Dynamics, Inc. |
| Ducommun INC |
| Duerr AG |
| Electromecanica Naval E Industrial SA |
| Elettronica - Societa PER Azioni |
| Energy Recovery, Inc. |
| Enerpac Tool Group Corp |
| Espey MFG and Electronics Corp |
| EVS Broadcast Equipment SA |
| Fabricacion de Elevadores SL * |
| Federal Signal Corp |
| Filtronic PLC * |
| Fisher (James) & Sons PLC |
| Flowserve Corp |
| Forum Energy Technologies, Inc. (J) |
| Forvia SE |
| G.H.B. (Holding) Limited |
| Genasys Inc. * |
| Gencor Industries, Inc. |
| General Dynamics Corp |
| General Electric Company |
| Gentex Corp |
| Gorman-Rupp Company (The) |
| Graco INC |
| Graham Corp |
| Greenbrier Companies, Inc. (The) |
| Guzzetti S.P.A. * |
| Heico Corp |
| Heidelberger Druckmaschinen AG |
| Heroux-Devtek INC |
| Hexcel Corp |
| Hiden Instruments Limited |
| Honeywell International INC |
| Huntington Ingalls Industries, Inc. |
| Idex Corp |
| IMI PLC |
| Indra Sistemas S.A. |
| Industrias Montanesas Electricas Mecanicas SL |
| Inficon Holding AG |
| Ingersoll Rand Inc. |
| Innovative Solutions & Support INC |
| Innovex International INC * |
| Interroll Holding AG |
| IPG Photonics Corporation |
| Istobal SA |
| Italcab S.P.A. |
| Jacobs Solutions Inc. |
| John Bean Technologies Corp |
| John Wood Group PLC |
| Johnson Controls International PLC |
| Jost Werke AG |
| Judges Scientific PLC |
| Kadant INC |
| Kbr, Inc. |
| Kesla OYJ |
| Keysight Technologies, Inc. |
| Klingelnberg AG |
| Koenig UND Bauer AG |
| Komax Holding AG |
| Konecranes OYJ |
| Kratos Defense & Security Solutions, Inc. |
| L3harris Technologies, Inc. |
| LAM Research Corp |
| Leonardo S.P.A. |
| Lillbacka Powerco Oy * |
| Linamar Corporation |
| Lockheed Martin Corp |
| Lombardi Converting Machinery S.P.A. |
| Magna International INC |
| Manitex International, Inc. |
| Manitou BF |
| Manitowoc Company, Inc. (The) |
| Marel HF |
| Mariani Societa’ PER Azioni |
| Marshall of Cambridge (Holdings) Limited * (J) |
| Maschinenfabrik Berthold Hermle AG |
| Mercury Systems INC * |
| Mikron Holding AG |
| Miller Industries INC |
| MKS Instruments INC * |
| Modine Manufacturing CO |
| Moog INC |
| Motorola Solutions, Inc. |
| Mpac Group PLC |
| MS International PLC |
| MTU Aero Engines AG * |
| Nammo AS |
| NC Engineering (Hamiltonsbawn) Limited |
| NFI Group Inc. * |
| Nordson Corp |
| Northrop Grumman Corporation |
| NOV INC |
| Nuova Idropress - Societa’ PER Azioni IN Forma Abbreviata NIP S.P.A. |
| NVE Corporation |
| Officina Bocedi SRL |
| Officina Meccanica F.Lli Tabarelli S.P.A. |
| Onto Innovation Inc. |
| Oshkosh Corporation |
| Oxford Instruments PLC |
| Oy El-Ho Ab |
| Paccar INC |
| Park Aerospace Corp. |
| Paul Mueller Company * |
| Ponsse OYJ |
| Portsmouth Aviation Holdings Limited |
| Powell Industries INC |
| PVA Tepla AG |
| Qinetiq Group PLC |
| Raute OYJ |
| Renew Holdings PLC |
| Renishaw PLC |
| REV Group, Inc. |
| Rheinmetall AG |
| Ricardo PLC * |
| Robson Handling Technology Limited * |
| Rockwell Automation, Inc. |
| Rohde & Schwarz GmbH & Co. Kommanditgesellschaft |
| Rolls-Royce Holdings PLC |
| Ropsley Limited |
| RTX Corp |
| RWG (Repair & Overhauls) Limited |
| Saab AB |
| Saalasti Oy |
| Safran |
| Sawo Holding A/S |
| SC Group-Global Limited |
| Schlatter Industries AG |
| Schmitt - Elevadores, LDA |
| Servotronics INC * |
| Siemens AG |
| Skako A/S |
| Smiths Group PLC |
| Solid State PLC (J) |
| Sonardyne Holdings Limited |
| Spirit Aerosystems Holdings, Inc. * |
| Star Refrigeration Limited |
| Systemair AB |
| TAI Milano S.P.A. |
| Talleres Mecanicos DEL SUR SA |
| Taylor Devices INC |
| Teagle Holdings Limited |
| Technipfmc PLC |
| Teledyne Technologies Incorporated |
| Tennant CO |
| Teradyne INC |
| Terex Corp |
| Tesmec SPA |
| Tevo Oy * |
| Textron INC |
| Thales |
| THE Shyft Group, Inc. * |
| Thwaites Limited |
| Thyssenkrupp AG * |
| Tiber Pack S.P.A. |
| Tomra Systems ASA |
| Tornado Global Hydrovacs Ltd. |
| Trakm8 Holdings PLC * |
| Transdigm Group Incorporated |
| Trinity Industries INC |
| Triumph Group INC |
| Tronrud Engineering AS |
| TTM Technologies INC |
| Twin Disc INC |
| Vaisala OYJ |
| Veeco Instruments INC |
| Vegsund Slip Holding AS |
| Viridien SA |
| VSE Corp |
| Wabash National Corp |
| Wacker Neuson SE |
| Wartsila OYJ |
| Washtec AG |
| Westinghouse AIR Brake Technologies Corp |
| Wilton Universal Group Limited |
| Witt & SON UK Holdings Limited |
| Woodward, Inc. |
| Xylem Inc. |
| Zebra Technologies Corp (J) |
‘*’ Indicates that the company is a loss-maker in the year.
(J) indicates a company that was not in either the ‘Develop and Make’ or the ‘Provide and Maintain’ activity group last year, but has been added this year in the replacement ‘Develop, Make and Support’ activity group.
Capital servicing rates
The capital servicing rates are used as part of the Step 4 Capital Servicing Adjustment (CSA) of the four-step process for determining the contract profit rate for a qualifying defence contract. A corresponding adjustment accounts, at an aggregate level, for different levels of capital employed across the companies in the index and so sets a baseline upon which Step 4 of the contract profit rate applies.
The capital servicing rates are calculated from indices of sterling denominated corporate bonds or fixed maturity deposits. The rates are rolling averages of the underlying rates.
| 2021/22 | 2022/23[5] | 2023/24 | 2024/25 | 2025/26 | |
|---|---|---|---|---|---|
| Fixed capital servicing rate | 3.27% | 2.87% | 2.90% | 3.26% | 3.64% |
| Positive working capital servicing rate | 1.33% | 1.09% | 1.67% | 3.10% | 4.69% |
| Negative working capital servicing rate | 0.65% | 0.51% | 0.51% | 1.61% | 3.21% |
[5] Shown are the 2022/23 rates recommended by the SSRO. The Secretary of State determined the BPR for 2022/23 as an average of the composite underlying rates calculated by the SSRO for the three years prior to 2021 (8.50%, 8.23%, and 8.19%), keeping the BPR at 8.31 per cent. This fixed the capital servicing rates the same as for 2021/22.
Data sources
For further information on the data selection approach please see section 13 of the Single Source baseline profit rate and capital servicing rates methodology.
| Rate | Description | |
|---|---|---|
| Fixed capital servicing rate | Seven-year average of ’15-year BBB GBP’ bonds | BVCSGU15 BVLI Index |
| Positive working capital servicing rate | Three-year average of ‘1-year BBB GBP’ bonds | BVCSGU01 BVLI Index |
| Negative working capital servicing rate | Three-year average of Monthly average of UK resident monetary financial institutions’ (excl. Central Bank) sterling weighted average interest rate - time deposits with fixed original maturity <=1 year from private non-financial corporations (in percent) not seasonally adjusted | CFMBI32 |
Sources: Bloomberg and Bank of England
Trends in capital servicing rates
Government owned contractor rate
The government owned contractor rate is a baseline profit rate that may be applied to qualifying contracts in place of the baseline profit rate set out on page 1.
The government owned contractor rate must only apply to qualifying defence contracts where:
- the contract is between Secretary of State and a company incorporated under the Companies Act that is wholly owned by the UK Government; and
- both parties to the contract agree that it should apply.
| 2021/22 | 2022/23 | 2023/24 | 2024/25 | 2025/26 | |
|---|---|---|---|---|---|
| Government owned contractor rate | 0.057%[6] | 0.046% | 0.038% | 0.00% | 0.00% |
Note: The government owned contractor rate was first introduced for 2021/22.
[6] The SSRO did not recommend a government owned contractor rate for 2021/22 and the rate was assessed by the Secretary of State. The reason for doing so is set out in the London Gazette: https://www.thegazette.co.uk/notice/3760612.
Calculation of government owned contractor rate
The government owned contractor rate is set to enable a contract profit rated of zero for contracts with companies wholly owned by the Secretary of State.
Prior to 2024/25 the government owned contractor rate was set at a level that is opposite to the application of the SSRO funding adjustment. For 2024/25 onwards, Schedule 10 of the Procurement Act 2023 has come into force removing the SSRO funding adjustment from the previous six-step contract profit rate process, meaning the government contractor rate is now set at zero.