ANNEX D: ANNOUNCEMENT - LONDON GAZETTE
SECRETARY OF STATE FOR DEFENCE
THE IMPLEMENTATION FROM 1 APRIL 2025 OF NEW PROFIT RATES FOR SINGLE SOURCE DEFENCE CONTRACTS
As required by Section 19(4) of the Defence Reform Act 2014, the Minister of Defence Procurement on behalf of the Secretary for Defence has announced that the baseline profit rate for single source defence contracts has been set at 8.56%, based on an underlying rate of 9.14%. This is in line with the rate recommended by the Single Source Regulations Office (SSRO). It will come into effect from 1 April 2025.
The SSRO’s recommendation on the Capital Servicing Allowance to be applied to single source defence contracts has also been accepted and these rates are set out in Table 1. These rates will come into effect from 1 April 2025.
Table 1: SSRO’s Recommended Rates agreed the Secretary of State for Defence
| Element | 2024/25 rates | 2025/26 rates |
| Baseline Profit Rate (BPR) (% on contract cost) | 8.24% | 8.56% |
| Baseline Profit Rate to apply to contracts between the Secretary of State and a company wholly owned by the UK Government and where both parties agree (% on contract cost) | 0.00% | 0.00% |
| Fixed Capital Servicing Rate (% on Fixed Capital employed) | 3.26% | 3.64% |
| Working Capital Servicing Rate (% on positive Working Capital employed) | 3.1% | 4.69% |
| Working Capital Servicing Rate (% on negative Working Capital employed) | 1.61% | 3.21% |