The baseline profit rate for single source defence contracts agreed from 1 April 2026 is 9.10%, up from 8.56%. It is the starting point of the four-step contract profit rate, which adds a cost risk adjustment, any incentive adjustment and a return on capital employed.
The rates, 2015/16 to 2026/27
Financial years from 1 April. The average agreed contract profit rate is the SSRO's figure for contracts that became QDCs or QSCs in each year; 2026/27 is not yet reported.
Every rate since 2015
| Year | Baseline | Fixed capital | Working capital + | Working capital − | SSRO funding | Govt-owned |
|---|---|---|---|---|---|---|
| 2026/27 | 9.10% | 4.05% | 5.25% | 4.18% | – | 0% |
| 2025/26 | 8.56% | 3.64% | 4.69% | 3.21% | – | 0% |
| 2024/25 | 8.24% | 3.26% | 3.10% | 1.61% | – | 0% |
| 2023/24 | 8.29% | 2.90% | 1.67% | 0.51% | 0.038% | 0.038% |
| 2022/23 | 8.31% | 3.27% | 1.33% | 0.65% | 0.046% | 0.046% |
| 2021/22 | 8.31% | 3.27% | 1.33% | 0.65% | 0.057% | 0.057% |
| 2020/21 | 8.22% | 3.66% | 1.22% | 0.61% | 0.052% | – |
| 2019/20 | 7.63% | 3.98% | 1.18% | 0.53% | 0.042% | – |
| 2018/19 | 6.81% | 4.38% | 1.21% | 0.53% | 0.024% | – |
| 2017/18 | 7.46% | 4.84% | 1.37% | 0.59% | 0.025% | – |
| 2016/17 | 8.95% | 5.08% | 1.40% | 0.74% | – | – |
| 2015/16 | 10.60% | 5.94% | 1.72% | 1.03% | – | – |
Each year links to its London Gazette notice. Baseline: the baseline profit rate. Capital servicing rates for fixed capital and for positive and negative working capital. SSRO funding: the adjustment deducted at its own step until April 2024. Govt-owned: the rate for contracts with companies wholly owned by the UK Government.
The 2017 notice gives the 2016/17 negative working capital rate as 0.73%; the 2016 notice that set it gives 0.74%, which is shown here.
The SSRO funding adjustment was deducted at its own step until contracts entered into from 1 April 2024. The 2023 notice prints it without a minus sign.
From 2021/22 a second baseline profit rate applies to contracts with companies wholly owned by the UK Government where both parties agree. It has been 0% since 2024/25.
How the contract profit rate is built
- Step 1: Baseline profit rate. Set each year by the Secretary of State on the SSRO's assessment and published in the London Gazette. The rate in force at the time of agreement applies. "Take the baseline profit rate (see section 19) which is in force at the relevant time" (source)
- Step 2: Cost risk adjustment. Plus or minus up to 25% of the baseline profit rate, for the financial risk the contractor takes on the costs. "Adjust the baseline profit rate by an agreed amount which is within a range of plus or minus 25% of the baseline profit rate" (source)
- Step 3: Incentive adjustment. Up to 10 percentage points on a QDC agreed from 5 June 2026 (2 points before), and up to 2 points on a QSC, paid only for an objectively verifiable outcome. "that amount not to exceed ten percentage points" (source)
- Step 4: Capital servicing adjustment. A return on the fixed and working capital the contractor employs on the contract, at the capital servicing rates in force. "must have regard to the capital servicing rates in force at the time of the agreement" (source)
What changed
- 28 Jul 2026 SSRO statistics: the average agreed contract profit rate on new 2025/26 contracts was 10.75%, the highest since the regime's first year, 2015/16. Source
- 5 Jun 2026 Single Source Contract (Amendment) Regulations 2026 in force: the incentive adjustment on a QDC can reach 10 percentage points, to reward faster delivery. Source
- 1 Apr 2026 Baseline profit rate rises to 9.10% for 2026/27, from 8.56%. Source
- 1 Apr 2024 Four steps replace six for contracts entered into from 1 April 2024. The POCO adjustment and the SSRO funding adjustment go. Source
A contract profit rate calculator for any date since April 2024, SSRO statistics on regulated contracts by year, where the profit on them comes from, and 6 points on what this means for contracts, deals and financings. Free with a work email.
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General information, not legal advice. Rates link to the London Gazette; statistics to the SSRO.